We recently issued an updated research report on C.H. Robinson Worldwide CHRW. While its shareholder-friendly attitude buoys optimism, issues like high operating expenses and escalated debt levels raise concerns.
Let’s discuss in details the factors influencing the stock.
We are encouraged by the company’s efforts to reward shareholders through dividends and share buybacks. In December 2018, the board of directors of the company approved a 9% hike in its quarterly cash dividend to 50 cents per share (or $2 annually). The company has paid dividends for more than 25 years.
Moreover, the company boosted its buyback program in May, adding another 15 million shares to the share repurchase authorization of 1.2 million shares, which was approved in 2013. Over the past five years, it has returned more than $2.8 billion to shareholders through a combination of dividends and share repurchases.
We are also impressed by the company's presentation in August 2018 at the 7th Annual Intellisight Conference, where the company provided an update on its long-term growth prospects. It anticipates NAST and Robinson Fresh revenues to rise between 5% and 10% and between 4% and 8% respectively over the long-term.
Global forwarding and other (including Managed Services, European Surface Transportation and all other services) revenues are expected to grow by more than 10% each. Additionally, earnings per share is also predicted to rise by more than 10% over the long-term.
Improvement in operating ratio (operating expenses as a percentage of net revenues) is also a positive. The lesser the value of operating ratio the better, as it implies that more cash is available to the company to reward shareholders through dividends/buybacks.
Moreover, with consistent earnings growth and efficient working capital performance, the company's cash flow from operations increased more than 100% to $529 million in the first nine months of the year. We are also impressed by the company's growth-by-acquisition policy.
C.H. Robinson Worldwide, Inc. Price
C.H. Robinson Worldwide, Inc. Price | C.H. Robinson Worldwide, Inc. Quote
On the flip side, high operating expenses have been hurting the company for quite some time and expected to dent bottom-line growth in the final quarter of 2018 as well. The company's high debt levels add to the woes.
Zacks Rank & Key Picks
C.H. Robinson Worldwide carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the broader Transportation sector are CSX Corp. ( CSX, Air France-KLM ( AFLYY and Spirit Airlines ( SAVE, each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today's Zacks #1 Rank stocks here.
Shares of Air France-KLM and Spirit have surged more than 26% and 100%, respectively, in the past six months. Meanwhile, the CSX stock flaunts an impressive earnings history, having outpaced the Zacks Consensus Estimate in each of the trailing four reported quarters, the average being 15.4%.
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