February 6, 2013
Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Shares of freight and shipping company C.H. Robinson Worldwide (NASDAQ: CHRW ) sank 10% today after its quarterly profit missed Wall Street expectations.
So what: The stock has rallied over the past several months on signs of a pickup in demand, but today's fourth-quarter profit miss -- adjusted EPS of $0.68 versus the consensus of $0.70 -- is triggering concerns over slowing returns going forward. While revenue was slightly better than expected, net revenue margin declined year over year, suggesting that management's focus on market share growth continues to weigh on profitability.
Now what: Don't be too quick to pounce on this pullback. "[I]t's very difficult to predict what's going to happen in the market and what's going to happen with those net revenue margins," Chairman and CEO John Wiehoff said in a conference call. "[I]f the market continues to be difficult and generate net revenue margin compression for us, our strategy is to accept the productivity challenges that come with that and continue to invest." With the stock still up about 20% from its 52-week lows and trading at a P/E of 20, I'd wait for a much larger margin of safety before taking on that uncertainty.
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