C.H. Robinson (NASDAQ: CHRW) has reported its second consecutive quarter of exceeding expectations, prompting a rise in its stock price during post-market trading and showcasing the positive effects of CEO Dave Bozeman’s strategic changes implemented over the past year.
In late April, C.H. Robinson’s first-quarter earnings report highlighted sequential improvements, though year-over-year comparisons remained modest. This focus on sequential progress, while typically less significant to investors, resulted in a notable increase in the company’s stock price from $72.09 at the close of May 1 to nearly $88 by the end of May.
The positive market reaction continued on Wednesday, with C.H. Robinson’s stock climbing approximately 11% to $98.85 by 5:50 p.m., even as the company’s earnings call with analysts was still ongoing.
A key distinction from the previous quarter is the improvement in year-over-year performance. The North American Surface Transportation (NAST) segment, responsible for the company’s truck, ocean, and air brokerage operations, experienced a 3% decline in revenue compared to last year. However, the segment’s adjusted gross profit (AGP) increased by around 4.5%. Truckload gross profits rose by 4.75%, LTL increased by 5.9%, and ocean gross profits saw a 7.9% boost, though air gross profits fell by 9.1%.
Sequentially, NAST’s truckload AGP grew by 6.1%, reflecting positive performance in this largest segment. Bozeman highlighted that the truckload operations had gained market share for the fourth consecutive quarter, emphasizing margin improvements.
The company’s adjusted operating margin, excluding restructuring costs, climbed 600 basis points to 28.1% from 22.1% a year earlier, with adjusted income from operations up nearly 32%. Non-GAAP earnings per share of $1.15 surpassed consensus estimates by 19 cents, though total revenue of $4.48 billion fell $40 million short of expectations.
Bozeman’s strategic overhaul, introduced upon his appointment as CEO on June 26, 2023, aligns closely with these year-over-year gains. He elaborated on the “new Robinson operating model” during the earnings call, detailing its principles and emphasizing the use of a “balanced scorecard” approach with key metrics to drive growth and operational efficiency. This model features a binary assessment of performance—metrics are either “green” (on track) or “red” (requiring improvement), with no intermediate “yellow” status.
Bozeman stressed that any “red” indicators prompt necessary changes, such as more disciplined pricing or improved customer and carrier services, focusing on problem-solving rather than assigning blame.
Despite variations in AGP performance throughout the quarter, with a 5% decline in April and a 15% increase in June, Bozeman and NAST President Michael Castagnetto remain optimistic. Castagnetto noted that recent improvements reflect the operational model’s gradual adaptation and anticipated enhanced performance moving forward.
Addressing concerns about sales team reductions, Castagnetto confirmed ongoing expansion of the sales team while refining operational methodologies. The company’s workforce is down by 10% year-over-year. Castagnetto also indicated that despite a persistent oversupply in capacity and slower carrier attrition, market conditions are beginning to show signs of positive change.
In summary, C.H. Robinson’s robust quarterly results and strategic advancements under Bozeman’s leadership highlight a promising trajectory for the brokerage giant.
