C.H. Robinson Worldwide Inc.
) is one of the first-in-class third-party logistics (3PL)
companies given its consistent growth rate over the past few years.
The company's asset light model, with diversified freight
forwarding solutions, provides more earnings flexibility in an
We believe the demand of 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.
Moreover, we expect the growing demand for customs brokerage and
transportation management services to help the company grow beyond
its core offering - truck brokerage - and provide a competitive
advantage in the present market.
We believe C.H. Robinson's growth opportunities include
expansion of US truckload brokerage, where it possesses less than
5% of market share, penetration in the less-than-truckload and
intermodal markets, expansion of Transportation Management Center
(TMC) services offerings, international freight forwarding and
European truck brokerage.
These broad-based growth opportunities are expected to bode well
for the company's long-term growth target of 15% in terms of gross
profit (net revenue), net income and earnings per share.
However, a major impediment for the company remains intense
competition in the transportation services industry. C.H. Robinson
competes against logistics companies like
Expeditors International of Washington Inc.
) as well as transportation providers owning their own
The company does not own or control the transportation assets
for freight deliveries. It depends on independent third parties to
provide truck, rail, ocean, and air services. In the event of
insufficient equipment to deliver services and increased
competition, the company's profitability could be hit hard.
In addition, the current trend of road freight conversion to
rail intermodal is also likely to have a negative impact on the
Trucking business. We expect a challenging air freight market to
weigh on the company's growth goals due to global economic
constrains that are limiting shippers from adhering to any
expensive mode of transportation within their supply chain.
Going forward, we expect a rise in capital expenditure to also
weigh on margin expansion. Further, the company's inability to
enter the European 3PL market through expansion plans due to an
uncertain economic outlook could also remain detrimental to its
As a result, we are currently maintaining our long-term Neutral
recommendation on C.H. Robinson. For the short term, the company
holds a Zacks #3 (Hold) Rank.
CH ROBINSON WWD (CHRW): Free Stock Analysis
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