Shares of C.H. Robinson Worldwide, Inc. CHRW have fared well in a year’s time. The stock has increased 6.5%, against the industry’s decline of 7.9%.
Reasons for Impressive Price Performance
The Minnesota-based third-party logistics company has an impressive surprise history. It beat estimates in each of the trailing four quarters, the average being 8%.
C.H. Robinson is being aided by strong freight demand and lower taxes. The company’s growth-by-acquisition policy is another positive. The buyout of Milgram & Company is expected to boost results in the fourth quarter of 2018.
Furthermore, we are impressed by the company's presentation at the 7th Annual Intellisight Conference in August. The company provided an update on long-term growth prospects at the conference. It anticipates NAST and Robinson Fresh revenues to rise between 5% and 10% as well as between 4% and 8% over the long term, respectively. Meanwhile, Global forwarding and other (including Managed Services, European Surface Transportation and all other services) revenues are expected to grow more than 10% each. Earnings per share are also predicted to rise more than 10% over the long-term.
Moreover, improvement in operating ratio (operating expenses as a percentage of net revenues) is a positive. The lesser the value of operating ratio the better it is, as it implies that more cash is available for rewarding shareholders through dividends/buybacks. Moreover, with consistent earnings growth and efficient working capital performance, the company's cash flow from operations surged more than 100% to $529 million in the first nine months of 2018.
Additionally, we are optimistic about C.H. Robinson’s efforts to reward shareholders through dividends and share buybacks. In December 2017, the board of directors approved a 2.2% hike in quarterly cash dividend to 46 cents per share (or $1.84 annually). The company has paid dividends for more than 25 years. In fact, the company boosted buyback program in May, adding another 15 million shares to the existing share repurchase authorization of 1.2 million shares (approved in 2013). it has returned around $422 million to shareholders in the first nine months of 2018, up 24% year over year.
Bullish Readings & Zacks Rank
The positivity around the stock can be gauged from the Zacks Consensus Estimate being revised 2.6% upward in the past 60 days for current-quarter earnings.
C.H. Robinson flaunts an impressive VGM Score of A. Here V stands for Value, G for Growth and M for Momentum and the score is a weighted combination of all three scores.
Considering these positives, we believe that C.H. Robinson is an appropriate investment option. The Zacks Rank #2 (Buy) carried by the stock seems to suggest the same.
Other Stocks to Consider
Investors interested in the Zacks Transportation sector may consider Air France-KLM SA AFLYY, CSX Corporation CSX and Spirit Airlines, Inc. 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, CSX Corporation and Spirit Airlines have returned 32.6%, 12.3% and 69.2% in the past six months, respectively.
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