C.H. Robinson Worldwide, Inc. (CHRW) in Eden Prairie, Minn., provides logistics solutions and freight transportation services globally. It is one of the largest logistics companies in the world, with more than $28 billion in freight under management and more than 20 million shipments annually. The company operates in two segments: North American Surface Transportation; and Global Forwarding. However, CHRW has an ISS Governance QualityScore of 9, indicating high governance risk.
The stock has declined 17.6% in price year-to-date and 14.8% over the past five days to close yesterday’s trading session at $88.73.
The bearish investor sentiment can be attributed to the global supply chain disruption, which has increased shipping costs considerably, thereby shrinking CHRW’s profit margins.
Here is what could shape CHRW’s performance in the near term:
Mixed Growth Prospects
Analysts expect CHRW’s revenues to increase 24.4% in its fiscal 2022 first quarter (ending March 2022), 10.6% in the next quarter, and 5.7% in fiscal 2022. The company’s EPS is expected to improve 20.6% in the current quarter, 11.7% in fiscal 2022 second quarter (ending June 2022), and marginally in the current year.
However, the Street expects CHRW’s revenues and EPS to slump 6.9% and 8.5%, respectively, next year.
Low Valuation
In terms of forward non-GAAP P/E, CHRW is currently trading at 14.06x, which is 25.7% lower than the 18.93 industry average. Its 1.32 forward non-GAAP PEG multiple is 9.5% lower than the 1.46 industry average, while its 11.25 forward EV/EBITDA ratio is 5.1% lower than the 11.85 industry average.
In addition, CHRW’s forward Price/Sales and Price/Cash Flow multiples of 0.47 and 12.57, respectively, compare with the 1.48 and 14.88 industry averages.
Consensus Rating and Price Target Indicate Potential Upside
Of 16 Wall Street analysts that rated CHRW, seven rated it Buy while eight rated it Hold and one rated it Sell. The 12-month median price target of $107.93 indicates a 21.6% potential upside from yesterday’s closing price of $88.73. The price targets range from a low of $65.00 to a high of $180.00.
POWR Ratings Reflect Uncertainty
CHRW has an overall C rating, which equates to Neutral in our proprietary POWR Ratings system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.
CHRW has a C grade for Momentum and Quality. It is currently trading above its 50-day and 200-day moving averages of $102.90 and $95.94, respectively, indicating a downtrend, and in sync with the Momentum grade. In addition, CHRW’s 3.65% net income margin is 43.4% higher than the 6.46% industry average, justifying the Quality grade.
Among 22 stocks in the Trucking Freight industry, CHRW is currently ranked #18.
Beyond what I have stated above, view CHRW ratings for Growth, Sentiment, Stability, and Value here.
Bottom Line
CHRW’s total revenues and EPS increased 42.9% and 61.1%, respectively, year-over-year to $6.50 billion and $1.74 in its fiscal fourth quarter, ended Dec. 31, 2021. However, the company missed the $1.86 consensus EPS estimate by 6.4% due to an increase in operating expenses.
As global supply chain disruptions continue, CHRW’s profit margins are expected to take a hit in the coming months. Thus, we think investors should wait until CHRW’s profit margins stabilize before investing in the stock.
How Does C.H. Robinson Worldwide, Inc. (CHRW) Stack Up Against its Peers?
While CHRW has a C rating in our proprietary rating system, one might want to consider looking at its industry peers, Schneider National, Inc. (SNDR), USA Truck, Inc. (USAK), and ArcBest Corporation (ARCB), which have a B (Buy) rating.
Note that SNDR is one of the few stocks handpicked currently in the Reitmeister Total Return portfolio. Learn more here.
Note that USAK is one of the few stocks handpicked by our Chief Value Strategist, Steve Reitmeister, currently in the POWR Value portfolio. Learn more here.
CHRW shares were trading at $87.80 per share on Monday morning, down $0.93 (-1.05%). Year-to-date, CHRW has declined -18.42%, versus a -5.26% rise in the benchmark S&P 500 index during the same period.
About the Author: Aditi Ganguly
Aditi is an experienced content developer and financial writer who is passionate about helping investors understand the do’s and don'ts of investing. She has a keen interest in the stock market and has a fundamental approach when analyzing equities.
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