Freight logistics company C.H. Robinson Worldwide (CHRW 2.23%) delivered a standout earnings performance in a difficult environment for transportation companies.
Investors are taking notice, sending C.H. Robinson shares up 17% as of 10:45 a.m. ET.
Getting lean at just the right time
C.H. Robinson is an asset-light logistics company, connecting its more than 90,000 customers to contract carriers and helping those customers coordinate their supply chains.
In an earnings season where many transports have reported soft demand, C.H. Robinson easily topped expectations in the first quarter. The company earned $0.88 per share on revenue of $4.4 billion, surpassing Wall Street's consensus estimate of $0.62 per share in earnings on sales of $4.2 billion.
Revenue fell by 4.3% year over year and gross profit decreased by 4.5%. CEO Dave Bozeman attributed the beat to C.H. Robinson implementing its new "Lean-based" operating model, which helps it to optimize freight shipment, and said the company also was able to increase its share of the total market.
"Although we continue to battle through an elongated freight recession with an oversupply of capacity, I'm optimistic about our ability to continue improving our execution regardless of the market environment," Bozeman said. "Our new operating model is being deployed at the enterprise, divisional and shared service levels and is evolving our execution and accountability by bringing more structure to our continuous improvement cadence and culture."
The company's freight forwarding business was a highlight, with growth fueled by ocean rates gains due to ongoing issues in the Red Sea.
NASDAQ: CHRW
Key Data Points
Is C.H. Robinson stock a buy after its earnings report?
It is worth noting investors came into earnings season with low expectations. Shares of C.H. Robinson were down about 36% year to date prior to earnings and are still down 20% even after Thursday's surge.
Shipping is a cyclical business and there is only so much any management team can do to boost results in a period of soft demand. This stock is unlikely to really take off until the macroeconomic picture becomes more clear and large shipping customers begin to boost their inventories.
But if nothing else, C.H. Robinson's quarter provides a reminder that it is a best-in-class operator. For investors willing to ride out the storm, there are few better choices among transportation stocks.
