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Freight transportation intermediary C.H. Robinson (NASDAQGS:CHRW) fell short of analysts' expectations in Q2 CY2024, with revenue up 1.4% year on year to $4.48 billion. It made a non-GAAP profit of $1.15 per share, improving from its profit of $0.90 per share in the same quarter last year.
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C.H. Robinson Worldwide (CHRW) Q2 CY2024 Highlights:
- Revenue: $4.48 billion vs analyst estimates of $4.52 billion (small miss)
- Operating profit (non-GAAP): $193.3 million vs analyst estimates of $159.6 million (21.1% beat)
- EPS (non-GAAP): $1.15 vs analyst estimates of $0.96 (20.2% beat)
- Gross Margin (GAAP): 15.3%, up from 6.8% in the same quarter last year
- Free Cash Flow of $173.7 million is up from -$55.8 million in the previous quarter
- Market Capitalization: $10.46 billion
Engaging in contracts with tens of thousands of transportation companies, C.H. Robinson (NASDAQGS:CHRW) offers freight transportation and logistics services.
Air Freight and LogisticsThe growth of e-commerce and global trade continues to drive demand for expedited shipping services, presenting opportunities for air freight companies. The industry continues to invest in advanced technologies such as automated sorting systems and real-time tracking solutions to enhance operational efficiency. Despite the advantages of speed and global reach, air freight and logistics companies are still at the whim of economic cycles. Consumer spending, for example, can greatly impact the demand for these companies’ offerings while fuel costs can influence profit margins.
Sales GrowthA company's long-term performance is an indicator of its overall business quality. While any business can experience short-term success, top-performing ones enjoy sustained growth for multiple years. Unfortunately, C.H. Robinson Worldwide's 1.6% annualized revenue growth over the last five years was weak. This shows it failed to expand in any major way and is a rough starting point for our analysis.
Long-term growth is the most important, but within industrials, a half-decade historical view may miss new industry trends or demand cycles. C.H. Robinson Worldwide's history shows it grew in the past but relinquished its gains over the last two years, as its revenue fell by 18.6% annually.
C.H. Robinson Worldwide also breaks out the revenue for its most important segments, North American surface transportation and Global Forwarding, which are 66.7% and 20.5% of revenue. Over the last two years, C.H. Robinson Worldwide's North American surface transportation revenue (transportation brokerage) averaged 12.5% year-on-year declines while its Global Forwarding revenue (worldwide ocean, air, customers ) averaged 32.3% declines.
This quarter, C.H. Robinson Worldwide's revenue grew 1.4% year on year to $4.48 billion, falling short of Wall Street's estimates. Looking ahead, Wall Street expects sales to grow 5.1% over the next 12 months, an acceleration from this quarter.
Operating Margin C.H. Robinson Worldwide was profitable over the last five years but held back by its large expense base. It demonstrated lousy profitability for an industrials business, producing an average operating margin of 4.3%. This result isn't too surprising given its low gross margin as a starting point.
Analyzing the trend in its profitability, C.H. Robinson Worldwide's annual operating margin decreased by 1.2 percentage points over the last five years. The company's performance was poor no matter how you look at it. It shows operating expenses were rising and it couldn't pass those costs onto its customers.
This quarter, C.H. Robinson Worldwide generated an operating profit margin of 4%, in line with the same quarter last year. This indicates the company's cost structure has recently been stable.
EPSWe track the long-term growth in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company's growth was profitable.
Sadly for C.H. Robinson Worldwide, its EPS declined by 7.7% annually over the last five years while its revenue grew by 1.6%. This tells us the company became less profitable on a per-share basis as it expanded.
Diving into the nuances of C.H. Robinson Worldwide's earnings can give us a better understanding of its performance. As we mentioned earlier, C.H. Robinson Worldwide's operating margin was flat this quarter but declined by 1.2 percentage points over the last five years. This was the most relevant factor (aside from the revenue impact) behind its lower earnings; taxes and interest expenses can also affect EPS but don't tell us as much about a company's fundamentals.
Like with revenue, we also analyze EPS over a more recent period because it can give insight into an emerging theme or development for the business. For C.H. Robinson Worldwide, its two-year annual EPS declines of 36.5% show its recent history was to blame for its underperformance over the last five years. These results were bad no matter how you slice the data.
In Q2, C.H. Robinson Worldwide reported EPS at $1.15, up from $0.90 in the same quarter last year. This print easily cleared analysts' estimates, and shareholders should be content with the results. Over the next 12 months, Wall Street expects C.H. Robinson Worldwide to grow its earnings. Analysts are projecting its EPS of $3.34 in the last year to climb by 15.7% to $3.87.
Key Takeaways from C.H. Robinson Worldwide's Q2 Results We were impressed by how significantly C.H. Robinson Worldwide blew past analysts' operating profit and EPS expectations this quarter despite a revenue miss. Zooming out, we think this was still a decent, albeit mixed, quarter, showing the company is staying on track. The stock traded up 11.2% to $99 immediately following the results.
