Of the 22 analysts covering C.H. Robinson Worldwide (CHRW), four (18%) have recommended “strong buy,” three (14%) have recommended “buy,” 12 (54%) have recommended “hold,” and three (14%) have recommended “sell.” Their 12-month consensus price target of $92.06 for CHRW implies a ~10% return based on its June 28 stock price of $83.72. In the past year, CHRW has returned 27.1%. Peers’ target prices and return potential are as follows
- XPO Logistics (XPO): $116.94 with an 8.5% return potential
- Expeditors International of Washington (EXPD): $70.75 with no return potential
- FedEx (FDX): $288.44 with a 27% return potential
- Old Dominion Freight Line (ODFL): $149.15 with no return potential
The iShares Industrials ETF (IYJ) has an exposure of 0.4% to CHRW, and 6.7% and 4.7% to major US railroads and airlines, respectively.
Why a “hold” for CHRW?
As a third-party logistics company. C.H. Robinson has grown successfully based on the fragmented nature of the US transportation industry. While oil prices were low, small-scale transportation companies were booming. However, things have started to change.
There is greater uncertainty about oil prices, which have risen consistently in the last few months. It this rise continues, the US transportation and logistics sector could see more consolidation like Knight Swift Transportation’s (KNX) and XPO Logistics’ (XPO), which could reduce CHRW’s business scope.
Secondly, blockchain technology is at US transportation companies’ doorstep. A blockchain is a ledger that is accessible to all parties involved in a transaction, including government agencies, shippers, transporters, customers, and customs agents.
Among railroads, Union Pacific (UNP) and Kansas City Southern (KSU) have welcomed this technology transformation, and worldwide parcel delivery giant FedEx (FDX) is very positive on it, which could mean middleman businesses such as CHRW will be impacted. In the next part, we’ll conclude the series by comparing CHRW’s and peers’ valuation.