The fourth-quarter and full-year results of C.H. Robinson were mixed, although the US-based 3PL managed to beat estimates for revenue and earnings in the last three months of 2016.
2016 gross revenues came in at $13.1bn, down 2.5% year-on-year, while total net revenues were flat at $2.27bn.
“The increase in total revenues was driven by volume growth across all of our services,” the group said on 31 January 2017, adding that “total net revenues decreased 1.6% in the fourth quarter” against comparable figures in the same period of 2015.
The net revenue decline was primarily due to lower truckload margins, it noted, adding: “APC Logistics, which was acquired at the close of business on September 30, 2016, represented approximately 2% of total net revenues in the fourth quarter of 2016.”
Annual operating costs rose in line with US inflation to $1.44bn, but didn’t harm earnings per share (EPS), which rose to $3.59 from $3.51 on a diluted basis.
Excluding stock repurchases, EPS would have grown only 0.6% to $3.53 year-on-year, which confirms that we have entered a more challenging trading environment for earnings expansion for some of the major global freight forwarders.
Net income, meanwhile, rose 0.7% annually to $513.3m from $509.6m.
Its core truckload unit remains under significant pressure, with quarterly and annual net revenues down 12.4% and 4.5% year-on-year, respectively, to $296.7m and $1.25bn. In 2016, truckload was responsible for 55% of total net revenues, including non-core “sourcing” sales, and that fell almost 58% from one year earlier.
The plunge in intermodal sales was also noticeable as net turnover in that division dropped 18.4% during the year, down to $33.4m from $41m one year earlier. Quarterly unit trends were similarly disappointing, but the intermodal business is the smallest in its diverse portfolio of activities, and there were bright spots in three other larger units – less-than truckload (LTL), ocean and air – whose aggregate annual sales totalled $708m, up about 7% from $662m one year earlier.
Recent results and the reaction of the stock market emphasised that investors remain wary of the risks of betting on a solid rally in its equity value from these levels, with consensus estimates from analysts pointing to more downside (22%) than upside (12%) from $75.5 a share, where it currently trades.
Its balance sheet is well capitalised, although headwinds persists that are unlikely to be mitigated by changing dynamics in many of its end markets – lower customer/market pricing, which weighed on recent performance, is one obvious headache going forward. In this context, investors will be not reassured by a lofty equity valuation that implies rich trading multiples associated both to forward earnings (20.5x), and adjusted operating cash flows (12.5x).
Finally, it announced that from this quarter onwards, reporting operating results will be based on three reportable segments — North American Surface Transportation (“NAST”), Global Forwarding, and Robinson Fresh.
Source: Transport Intelligence, February 02, 2017
Author: Alessandro Pasetti