C.H Robinson CHRW is actively working to reduce costs to combat the top-line weakness due to the freight downturn. Solid liquidity also bodes well for the company.
Factors Favoring CHRW
CHRW's 2024 Restructuring Program aims to advance the enterprise strategy by optimizing the company's cost structure. In the first quarter of 2024, the initiative streamlined management, reduced the workforce, and refocused product and technology efforts. Management anticipates incurring approximately $25 million of restructuring charges related to the program in the current year.
Despite an industry-wide decline in freight volumes, C.H Robinson's North American Surface Transportation volumes (truckload and LTL) increased by 1.5%, reflecting improved execution and pricing discipline.
CHRW’s total operating expenses declined 3.7% year over year in the first quarter of 2024. A decrease in operating expenses bodes well for the company’s bottom line. Purchased transportation and related services expenses also plunged by 6% on a year-over-year basis.
C.H Robinson ended the first quarter of 2024 with a robust liquidity position, holding approximately $121.8 million in cash and cash equivalents. The company reported a current ratio of 1.37 at the end of the quarter, which is favorable as a current ratio above 1 indicates that the company has sufficient cash to meet its debt obligations.
Key Risks
In the first quarter of 2024, soft market conditions impacted C.H Robinson's surface transportation results, leading to reduced revenues and adjusted gross profits compared to the first quarter of 2023. Global forwarding faced significant disruptions, which led to a 23% increase in air freight tonnage due to ocean freight conversions driven by market disruptions and increased North Asian e-commerce demand. These factors maintained high air freight costs and decreased the adjusted gross profit per metric ton despite a 7% rise in ocean volumes compared to the previous year's period, characterized by elevated inventory levels and weak consumer demand.
C.H. Robinson's focus on technology investments aimed at long-term growth is anticipated to impact its bottom line in the near term. The company recorded $22.5 million in capital expenditures in the first quarter of 2024, with projected expenditures for 2024 ranging between $85 million and $95 million.
Shares of CHRW have declined 11.9% in the past year compared with its industry’s drop of 14.9% in the same period.
Image Source: Zacks Investment Research
Zacks Rank
CHRW currently carries a Zacks Rank #3 (Hold).
Stocks to Consider
Some better-ranked stocks for investors’ consideration in the Zacks Transportationsector include SkyWest SKYW and Kirby Corporation KEX.
SkyWest currently carries a Zacks Rank #2 (Buy) and has an expected earnings growth rate of 787% for the current year.
SKYW has an impressive earnings surprise history. Its earnings outpaced the Zacks Consensus Estimate in each of the trailing four quarters, delivering an average surprise of 128%. Shares of SkyWest have jumped 101% in the past year.
KEX sports a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.Kirbyhas an expected earnings growth rate of 42.5% for the current year.
The company has an encouraging track record with respect to the earnings surprise, having surpassed the Zacks Consensus Estimate in each of the trailing four quarters. The average beat is 10.3%. Shares of Kirby have climbed 57.2% in the past year.
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