Analysts cut forecasts after the Eden Prairie-based logistics firm's earnings fell short.
Freight shipper C.H. Robinson Worldwide Inc. lost nearly 10 percent of its market value Wednesday, a day after posting slightly lower-than-expected fourth-quarter earnings and comments from CEO John Wiehoff that the company is off to a slow start this year in its cornerstone trucking-logistics business.
Shares of the Eden Prairie-based company closed down 9.7 percent to $60.50 on six times normal volume — the largest daily price drop among Standard & Poor’s 500 companies.
Robinson, the largest North American transportation logistics firm, reported fourth-quarter earnings per share late Tuesday of 68 cents per share, 2 cents short of the 70 cents that was the consensus of Wall Street analysts.
At least two analysts cut their profit outlook for 2013.
C.H. Robinson is grappling with “increased competition from rapidly expanding high-quality competitors,” John Larkin, analyst at Stifel Financial, said in a note to investors Wednesday, justifying his “sell” rating on the shares. “The company will suffer from the law of large numbers and post unimpressive [earnings growth].”
Robinson’s stock traded up to nearly $68 per share on anticipation of growing demand only last week.
Wiehoff pointed to transportation revenue gains of 14 percent to $409 million in the fourth quarter, aided by an acquisition, and said the company has made significant investments that allow it to take market share. However, in a conference call with analysts Wiehoff acknowledged stiff competition that could suppress profitability and was downbeat about January performance.
“In terms of growing our revenues and market presence at a greater rate than we’ve been able to grow our earnings the last couple of years, net revenue margin compression continues to be the core [challenge],” Wiehoff said, adding that the company will continue to invest in the people and technology that will enhance long-term profitability.
At $60.50 per share, the stock still trades at a lofty 20 times the analysts’ consensus estimate for 2013 per-share earnings of about $3 per share.
Matt Young, an analyst at Morningstar, concluded that stock traders Wednesday wanted signs that gross profit margins on operations were getting better in January.
“Instead there was not a lot of near-term evidence of improvement,” Young said in an interview. He said he thinks the worries may be misplaced about a company with a strong track record.
“While investors might be worried that a lot of the new truck brokers are placing pressure on Robinson’s gross margins, we think it’s more of a cyclical issue for Robinson that will ultimately work itself out,” Young said. “Carrier rates are rising, and it takes longer for Robinson to pass on those rate increases to their larger customers” because of long-term contracts.
Robinson reported gross profit of $444.6 million in the fourth quarter, up 11 percent from fourth quarter 2011, from its transportation segment of truck, ocean, air and other logistic services.
Staff writer Steve Alexander contributed to this report.
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