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Why C.H. Robinson Worldwide Stock Just Dropped 14.5%

By Rich Smith - Oct 30, 2019 at 1:51PM

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Too much supply and not enough demand means bad things for transportation companies.

What happened

Shares of logistics and trucking company C.H. Robinson Worldwide (CHRW -0.15%) plunged after reporting earnings Tuesday night and are trading down 14.5% as of 1:25 p.m. EDT today.

Expected to report profits of $1.14 per share on sales of $3.93 billion, C.H. Robinson missed on both counts. Profits for the fiscal third quarter 2019 were only $1.07, and sales were $3.86 billion.  

Tractor-trailer heading down the road.

Image source: Getty Images.

So what

The news was even worse than the earnings miss makes it sound. Sales declined 10% year over year for the quarter, and profit margins on those sales weakened -- operating margins dropped 370 basis points to 31.7% -- resulting in a 14.4% decline in net income.

CEO Bob Biesterfeld cited "an aggressive industry pricing environment ... driven by excess capacity and softening demand" that posed "challenges in both our North American Surface Transportation and Global Forwarding segments."

Now what

And it sounds like a situation that is already bad will get worse. "Looking ahead, we expect that North American routing guides will continue to reset at lower prices in response to the falling cost environment and decline in spot-market freight opportunities," Biesterfeld said. For at least the next few quarters, capacity will exceed available shipments, he said, which implies that C.H. Robinson investors should brace for further bad news through the end of this year and well into next.

No wonder investors are applying the parking brake and exiting the vehicle today.

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Stocks Mentioned

C.H. Robinson Worldwide, Inc. Stock Quote
C.H. Robinson Worldwide, Inc.
CHRW
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