On Aug 23, 2013, we upgraded third-party logistics company,
C.H. Robinson Worldwide, Inc.
), to Neutral from Underperform.
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Why the Upgrade?
We believe that the company's diverse customer base, advanced
technology and service levels, and brand value will help in
winning market share over the long term. The company will gain
through investments in complementary businesses like ocean, air
C.H. Robinson is considered to be among the first-in-class
third-party logistics (3PL) companies given its consistent growth
rate in the past few years. The demand for 3PL services is
rapidly growing as shippers seek cost-effective one-stop
solutions for their freight forwarding requirements. Given the
company's advanced technology and service capabilities, we
believe it is poised to capture a significant share in the
current freight transportation market.
The acquisition of Phoenix is expected to expand the company's
global footprint in forwarding services in both ocean and air
transportation categories along with custom brokerage. The
company also acquired Poland-based freight forwarder - Apreo
Logistics S.A - that mostly compliments its trucking business
with dry van, temperature controlled as well as liquid and dry
bulk capabilities. The acquisitions are expected to expose C.H.
Robinson to higher growth markets.
C.H. Robinson continues to have a strong balance sheet with
significant liquidity. The company also remains focused on
increasing shareholders' wealth by regular payments of dividends
and share repurchases. We believe that increased returns
strengthen shareholders' confidence in the company.
Nevertheless, we prefer to stay on the sidelines as a competitive
freight market, declining truckload market share and limited
margin expansion opportunities pose as near-term headwinds.
Further, the higher personnel expenses given the rise in
headcount and the increased integration cost associated with the
Phoenix acquisition will hinder the company's growth. Hence, the
company is expected to perform at par with the broader industry
and we advise investors to hold on to the stock.
C. H. Robinson currently carries a Zacks Rank #4 (Sell).
Stocks That Warrant a Look
Other Stocks that are worth considering within this sector are
American Railcar Industries Inc.
Expeditors International of Washington Inc.
). All the stocks currently hold a Zacks Rank #2 (Buy).