business

How is C.H. Robinson, the Eden Prairie-based trucking and transportation logistics operation, dealing with the situation? The same way it has dealt with the ups and downs of the economy for the past three decades. It still is finding a way to increase earnings and revenue, just as it has every year since 1980 when Congress deregulated the trucking and transportation industry.

"Our growth is certainly better in a good economy," conceded John Wiehoff, president and CEO of the 102-year-old company. "But we're confident we can continue to grow this business in the current economy." Since going public in 1997, the company has posted 10 consecutive years of record earnings and revenue.

One big advantage for C.H. Robinson is that it does not own any trucks, nor does it keep its drivers on staff. It is a logistics company that serves essentially as a broker between customers who need to move goods and transportation companies that do the hauling. The firm has about 29,000 clients -- although about one-third of its business comes from its largest 200 client companies -- and it uses about 48,000 transportation companies.

Typically, Robinson might get a call from a customer who needs to ship products from one city to another. Robinson then contacts transportation firms that cover that route to get bids. Once bids are in, Robinson awards the job to the firm with the best bid and schedules the shipment. Robinson makes its money by collecting a fee from its customers on all the jobs it arranges.

"C.H. Robinson has a big advantage over many of its competitors because it's worldwide, while many of its competitors are regional or local," said Keith Tufte, president of Eden Prairie-based Longview Wealth Management. "That allows them to serve both very small companies and large national companies such as Wal-Mart and General Mills. That also gives them very strong bargaining power with both their customers and their suppliers."

Robinson has about 220 branch offices worldwide, about 175 of them in North America.

Moving outsourced goods

About 15 years ago, all revenue came from North America. Now it's about 87 percent. "In 10 years I would guess that 25 percent or more of our revenue will come from outside North America," Wiehoff said.

Wiehoff said there are two primary drivers for the international growth: increased manufacturing abroad and the emergence of the European Union.

"In the past 10 to 20 years, companies have moved much of their manufacturing operations to developing countries that can offer lower manufacturing costs," Wiehoff said. "That increased the need for more transportation to move those goods. We're trying to fill those needs."

Business is also picking up in Europe because of a change in dynamics prompted by the European Union. "Twenty years ago, manufacturers had plants in nearly every country in Europe where they did business because of the delays, duties and taxes they faced to cross the border from country to country," Wiehoff explained.

But with the EU, those duties, taxes and delays disappeared. As a result, companies have consolidated their manufacturing operations with bigger plants in fewer spots, which increases the need for transportation to move their goods across Europe.

"There are very few large trucking companies in Europe," he said. "When companies work with us, they get access to more than 10,000 trucking companies in Europe. We believe the European trucking business could become as big as [that of] North America."

But Wiehoff still sees enormous growth potential in North America as well:

"The trucking and transportation industry is a trillion-dollar industry, and we have just a small slice of it." Robinson had revenue in 2007 of $7.3 billion.

The firm is continuing to expand its customer-service base to go after an increasing share of the transportation market. The firm hired 1,000 people in 2007 and expects to hire another 1,000 this year. It has about 7,500 employees, most of whom are in customer service.

Wiehoff also expects more revenue from the air and ocean transportation portions of its business, which now account for less than 10 percent. Trucking accounts for about 90 percent of total revenue.

"They have a great business model with excellent management," said Longview Management's Tufte, noting that return on equity is 32 percent and return on assets is 18 percent -- about twice that of most companies."

The stock recently was trading at about $52, down from its 52-week high of $67.27. "This is the kind of stock to buy and hold for your portfolio," Tufte said. "It may not be great this quarter or this year, but it's a great stock for the long term."

Gene Walden is the author of more than 20 books about business and investing. He lives in the Twin Cities. Send questions or comments to: gwalden100@comcast.net, or visit Allstarstocks.com.