Dividends, Buybacks Aid C.H. Robinson (CHRW) Despite High Capex

C.H. Robinson Worldwide CHRW is benefiting from a decrease in operating expenses and shareholder-friendly initiatives adopted by the company. Notably, shares of CHRW have gained 2.8% so far this year against the 1.2% loss of the industry it belongs to.

Zacks Investment Research

Image Source: Zacks Investment Research

The company recently reported first-quarter 2023 earnings (excluding 2 cents from non-recurring items) of 98 cents per share, which missed the Zacks Consensus Estimate of $1.01 and declined 52.2% year over year due to unfavorable pricing in ocean and truckload services. Total revenues of $4611.7 million lagged the Zacks Consensus Estimate of $4780 million and declined 32.3% year over year.

How is C.H. Robinson Doing?

C.H. Robinson’s measures to reward shareholders through dividends and share buybacks are encouraging. In November 2022, the company hiked its dividend to 61 cents per share from 55 cents. CHRW is also active on the buyback front. C.H. Robinson rewarded its shareholders in 2022 through a combination of cash dividends ($285.32 million) and share repurchases ($1,488.28 million). Continuing the shareholder-friendly approach, in the first quarter of 2023, the company repurchased shares worth $51.2 million and paid $73.4 million as cash dividends.

A decrease in operating expenses aids C.H. Robinson’s bottom-line results. The metric fell 6.4% to $524.6 million during the March quarter. Personnel expenses decreased 7.3% to $383 million, primarily due to cost optimization efforts. Selling, general and administrative expenses of $141.5 million also declined 4%, mainly owing to decreased credit losses.

On the flip side, C.H. Robinson’s first-quarter 2023 total revenues decreased 32.3% to $4.6 billion, primarily due to lower pricing in ocean and truckload services. Also, quarterly earnings of 98 cents per share declined 52.2% year over year. The North American Surface Transportation segment’s total revenues were $3,304.18 million (down 19.7% year over year) in the March quarter. Segmental revenues were hurt by lower truckload pricing due to lackluster freight demand. Total revenues from Global Forwarding were $790 million, down 64% year over year. Results were negatively impacted by lower pricing in CHRW’s ocean and air services, reflecting softening freight demand.

The company’s focus on making investments in technology, though aimed at long-term growth prospects, might weigh on C.H. Robinson’s bottom line in the near term. At the end of first-quarter 2023, capital expenditures rose 3% year over year. Capital expenditures for 2023 are anticipated to be between $90 million and $100 million.

Zacks Rank and Stocks to Consider

Currently, C.H. Robinson carries a Zacks Rank #3 (Hold).

Some better-ranked stocks for investors interested in the Zacks Transportation sector are Copa Holdings, S.A. CPA and Allegiant Travel Company ALGT.

Copa Holdings, presently sports a Zacks Rank #1 (Strong Buy), is aided by improved air-travel demand. We are encouraged by the company’s initiatives to modernize its fleet. CPA’s focus on its cargo segment is also impressive. You can see the complete list of today’s Zacks #1 Rank stocks here.

For second-quarter and full-year 2023, CPA’s earnings are expected to register 765.6% and 75.4% growth, respectively, on a year-over-year basis.

Allegiant, currently carries a Zacks Rank #2 (Buy), also benefits from buoyant air-travel demand. With air-travel demand rising in the United States, operating revenues improved 8.5% year over year in 2022.

Management expects revenues to remain strong in 2023 as well. In first-quarter 2023, operating revenues increased 29.9% on a year-over-year basis. For second-quarter and full-year 2023, ALGT’s earnings are estimated to rise 364.5% and 192%, respectively, on a year-over-year basis.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report