C.H. Robinson stays strong as shipping slows

There's a good chance that the bottled water or produce that you buy at the store or the advertising insert in your newspaper was shipped via C.H. Robinson, an Eden Prairie company that arranges for goods to be transported all over the world.

Like other shipping companies, C.H. Robinson is feeling the effect of decreasing orders and sales across a range of industries. Yet, a strong 2008 earnings report caught the attention of some Wall Street analysts, who raised their recommendations on the company after the Jan. 27 report.

According to Bloomberg News, seven of the 17 analysts have buy recommendations on its stock and 10 say hold. The analysts' consensus price target for shares a year from now is $53.50, according to Bloomberg. On Friday, shares closed at $50.00, up 14.6 percent since last month's earnings news.

So what makes C.H. Robinson stand out in a dismal economy?

Andrew Adams, a portfolio manager with Mairs and Power Inc. in St. Paul, which has followed C.H. Robinson, said the company has an advantage because it doesn't have the fixed costs of owning trucks.

"I compare their business to a trading floor of a brokerage firm -- they are just trying to match a shipper with the carrier and get the pricing right," Adams said. "They invest a ton in technology; when you visit them, you can see it." (Mairs and Power funds own the stock.)

C.H. Robinson, with $8.6 billion in sales last year, operates as a logistics coordinator to move the goods, managing freight for 32,000 customers, the largest of which is Wal-Mart. C.H. Robinson uses more than 50,000 truck, rail, air and ocean transportation companies worldwide and has 228 branch offices.

"We're more of a service company that doesn't have a lot of fixed-asset investments because we don't own the trucks, we don't own the warehouses," said Chairman and CEO John Wiehoff. "When volumes adjust rather aggressively like they have in the last few months, for companies that have a lot of capital and fixed-assets investments, it's much more difficult for them to adjust their business and to adjust their profitability on a short-term basis, where we can react pretty aggressively and modify our relationships and change the way we're interacting."

But Wiehoff said the company hasn't been left unscathed by the downturn.

"Shipping is decreasing -- we said in our year-end call with our shareholders and analysts that our volumes in December and January were down," he said. "So we're clearly not immune from the recession and the things that are happening," he said.

Even so, C.H. Robinson has shown strength. For 2008, the company reported gross revenue of $8.58 billion, up 17.3 percent, and net income up 10.8 percent to $359 million. In the fourth quarter, however, sales were virtually flat at $1.95 billion while income rose 4.3 percent to $88.9 million.

For the five-year period ending in January, total return to C.H. Robinson shareholders, including price appreciation and dividends, was 159 percent. The Standard & Poor's 500 index declined 17.7 percent during the same period.

Adams also said C.H. Robinson's technology makes it stand out. "They have all this data at their fingertips to make smart pricing decisions. You compare that to the alternative -- a lot of these independent carriers are a few trucks. They try to come up with business themselves. They don't have all the market data they can use."

Wiehoff said the company's compensation policy also is an asset.

"We have a very performance-based culture where all of us -- from myself on down -- everyone who is involved in the business side has a high degree of our compensation that is driven by the performance and profitability of the business," he said. When volumes decrease the company's main expenses are personnel costs for its 8,000 employes.

He cited the company's limited fixed assets and flexibility for helping it succeed.

"When you put all those things together, a number of the analysts believe, and we believe, that when times get turbulent like they are now, that while we won't be immune from the challenging times, hopefully we can adjust to them a little more flexibly than many other companies," he said.