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Will Freight Woes Mar C.H. Robinson's (CHRW) Q4 Earnings?

Zacks Equity Research

C.H. Robinson Worldwide, Inc. CHRW is slated to release fourth-quarter 2019 results on Jan 28, after the market closes.

The Zacks Consensus Estimate for fourth-quarter earnings has been revised downward by 6.3% in the past 90 days. Given this bleak outlook, let’s take a look at the factors that might have impacted the company’s fourth-quarter performance.

Continued weakness in freight environment due to the U.S.-China trade tensions is likely to have affected volumes. The lower volumes in turn, might get reflected in the company’s top line.

The company’s Global Forwarding segment is expected to have put up a dismal show in the soon-to-be-reported quarter with declines in air and ocean volumes as a result of the trade dispute. Evidently, the Zacks Consensus Estimate for gross revenues at the Global Forwarding segment indicates a 6.8% decline from the year-ago reported quarter.

Revenues at the North American Surface Transportation (NAST) segment (including Robinson Fresh) are also anticipated to have declined in the fourth quarter due to weak pricing. The consensus mark for NAST revenues suggests a 1.1% dip from that reported a year ago.

Amid the weak freight demand, excess truck capacity is weighing on the company’s truckload volumes and pricing. This headwind might reflect on the truckload revenues.

However, the Space Cargo and Dema Service buyouts of last March and May, respectively, are expected to have driven the top line, partly offsetting the adversity from  substantial contraction in volumes.

C.H. Robinson Worldwide, Inc. Price and EPS Surprise


C.H. Robinson Worldwide, Inc. Price and EPS Surprise
C.H. Robinson Worldwide, Inc. Price and EPS Surprise

C.H. Robinson Worldwide, Inc. price-eps-surprise | C.H. Robinson Worldwide, Inc. Quote

Earnings Whispers

The proven Zacks model does not conclusively predict an earnings beat for C.H. Robinson in the fourth quarter of 2019. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of a positive surprise. However, that is not the case here as elaborated below. You can see the complete list of today’s Zacks #1 Rank stocks here.

Earnings ESP: C.H. Robinson has an Earnings ESP of -2.26% as the Most Accurate Estimate is pegged at 97 cents, lower than the Zacks Consensus Estimate of 99 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: C.H. Robinson carries a Zacks Rank #4 (Sell).

Highlights of Q3 Earnings

In the last reported quarter, the company witnessed a negative earnings surprise of 7.8%. The bottom line also declined 14.4% year over year. Results were hurt by truckload margin compression in North America. Total revenues also fell short of the Zacks Consensus Estimate. Moreover, the top line fell 10.2% year over year. This downturn can be attributed to unfavorable pricing across most transportation service lines.

Stocks to Consider

Investors interested in the broader Transportation sector may consider Alaska Air Group, Inc. ALK, Canadian Pacific Railway Limited CP and Spirit Airlines, Inc. SAVE as these stocks possess the right combination of elements to come up with an earnings beat in their next releases.

Alaska Air Group has an Earnings ESP of +1.89% and a Zacks Rank #2. The company will release fourth-quarter earnings numbers on Jan 28.

Canadian Pacific has an Earnings ESP of +0.39% and a Zacks Rank #3. The company will announce fourth-quarter financial numbers on Jan 29.

Spirit Airlines has an Earnings ESP of +3.24% and a Zacks Rank of 2. The company is set to report fourth-quarter earnings on Feb 5.

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