Shares of C.H. Robinson Worldwide CHRW have lost 5.6% in the past year against the industry’s 3.8% growth.
Let’s delve deeper to unearth the reasons for such a disappointing price performance.
C.H. Robinson is taking a hit from the lackluster freight scenario in the United states. The company is seeing softness in truckload volumes due to weak freight market conditions. Due to depressing freight conditions, the company’s earnings missed estimates in three of the last four quarters, surpassing the same on a single occasion. The average negative surprise is 13.04%.
The already bleak volume scenario due to freight sluggishness is aggravated by the coronavirus crisis, which induced supply-chain disruptions. Moreover, amid the economic downturn, high capital expenditures may further impede prospects in the near term by limiting bottom-line growth. Despite several adversities, the company continues to project capital expenses of $60-$70 million for 2020.
Additionally, the company's total debt to total capital ratio stood at 0.47 at the end of the first quarter of 2020, comparing unfavorably with the reading of 0.42 at the end of the fourth quarter of 2019. The increasing debt-to-capitalization ratio indicates that the proportion of debt to finance the company’s assets is on the rise. Moreover, C.H. Robinson exited the first quarter with cash and cash equivalents of $295 million, way below the current debt figure of $373 million, implying that the company lacks enough cash in hand to meet even its current debt obligations.
Estimate Revision & Momentum Score
The fact that the Zacks Consensus Estimate for 2020 earnings has been revised 16.9% downward over the past 60 days, is indicative of the pessimism surrounding this Zacks Rank #4 (Sell) stock. Moreover, the stock has a Momentum Score of C, highlighting its short-term unattractiveness.
A few better-ranked stocks in the Zacks Transportation sector are Air Lease Corporation AL, Ryanair Holdings RYAAY and Teekay Tankers Ltd. TNK, all currently carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Long-term earnings (three to five years) growth rate for Air Lease, Ryanair Holdings and Teekay Tankers is estimated at 3.1%, 20.5% and 3%, respectively.
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