CH Robinson's Q2 Miss Should Come As No Surprise

Reviewing C.H. Robinson Worldwide Inc CHRW's second-quarter results, Barclays said the second-quarter earnings miss shouldn't come as a surprise, particularly given the increases in spot truckload rates.

Q2 Misses

Analyst Brandon Oglenski noted that the company reported second-quarter earnings per share of $0.78, missing his $0.88 estimate and the consensus estimate of $0.90. EBIT also missed expectations due to a margin-driven net revenue miss and higher operating expenditure associated with headcount increases, the analyst said.

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Barclays indicated that ocean and air segments experienced volume and pricing increases, contributing to 12 percent net revenue growth, excluding APC Logistics — a company acquired in the fourth quarter of 2016. Going by global forwarding results, the firm sees more positive outcomes for freight forwarder Expeditors International of Washington EXPD.

Margins A Concern

The firm believes C.H. Robinson's ambitious hiring plans are compounding cyclical margin challenges, with the management's long-term focus on gaining market share driving costs higher.

Barclays said finding a cheap or absolute entry point in C.H. Robinson's shares will be difficult at least in the near term, given investor concern about structural margin compression from disruptive technology based new entrant brokers.

Lowering Estimates, Price Target

As such, Barclays lowered its estimates for C.H. Robinson, with earnings per share estimate for 2017 trimmed to $3.35 and 2018 estimate to $3.60. The firm also lowered its price target to $67, while remaining Equal Weight on the stock.

The reduction in the price target was based on the firm's view that there is limited near-term opportunity for alpha in the shares.

At the time of writing, shares of C.H. Robinson were sliding 5.25 percent to $64.93.