CH Robinson Worldwide Inc.
) has increased its quarterly dividend from 33 cents to 35 cents,
representing a growth of 6% in dividend payments. The increased
dividend will be paid on December 31, to shareholders of the
record on December 17.
The company has continuously paid out dividends to
shareholders for over twenty-five years. In December 2011, CH
Robinson boosted its quarterly dividend by 13.8% from 29 cents
In addition, in August, 2012 there was an increase in the
company's share repurchase program by up to 10 million shares.
Currently, CH Robinson is authorized to buy back 2.3 million
shares under its 2009 buyback program.
Apart from investor returns, the company raised its estimated
capital expenditures to $46-$51 million from $40-$45 million,
given increased investment (approximately $6 million) in
intermodal container fleet.
We believe that the company's increased investor return and
capital expenditure stem from its continued growth despite
uncertainties surrounding the truck market. Being a third party
logistics company, CH Robinson's asset-light model provides
greater earnings flexibility during an economic downturn. In
addition, its multi-modal solutions remain advantageous in the
current freight market by providing a one-stop solution for
shippers, hence leading to reduced overall shipping cost.
Additionally, the company's diversified transport solutions help
it significantly despite a volatile truck market that constitutes
a significant revenue contributor.
However, CH Robinson remains challenged by rising third party
carrier cost. Given capacity issues, independent truck owners are
expected to further increase prices that could in turn compress
margins. In addition, on November 1, 2012 the company
entered a $500 million revolving unsecured credit facility in
order to finance the acquisition of Phoenix International
(privately-held global logistics company). We believe that the
new debt position would add a certain interest burden to the
company, which might not be very encouraging for earnings growth
Further, regulatory issues and competitive threats from
logistics services companies such as
Expeditors International of Washington Inc.
) also pose significant headwinds to the company's
CH Robinson retains a Zacks #3 Rank, implying a short-term
(1-3 months) Hold rating. For the long term, we have a Neutral
recommendation on the stock.
CH ROBINSON WWD (CHRW): Free Stock Analysis
EXPEDITORS INTL (EXPD): Free Stock Analysis
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