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Deutsche Bank Trims PT On C.H. Robinson Worldwide (CHRW) To $77, Reiterates 'Buy'

 April 25, 2012 02:05 PM

(By Balachander) Deutsche Bank (DB) lowered its price target on shares of C.H. Robinson Worldwide (NASDAQ:CHRW) to $77 from $79, while reiterating its "Buy" rating on the stock.

The bank also lowered its 2012-13E EPS estimates to $2.82 and $3.36, respectively, from $2.90 and $3.42 to reflect the better-than-expected volume growth, which was offset by higher-than-expected margin contraction.

CHRW reported Q1 EPS of $0.65/share inline with DB estimate and Consensus. Earnings were constrained by a $0.01/share bad debt expense from a pink-slime induced customer bankruptcy, DB noted.

"While we saw several encouraging fundamental changes in CHRW's underlying Q1 performance (better employee productivity (up 1.1% sequentially)), accelerating volume growth, and sequential transportation net profit margin expansion), the QTD update (net revenue/day up 1% on 10% NA TL volume growth) was nothing short of disappointing and will likely drive relative underperformance in the shares today," DB said.

[Related -C.H. Robinson Worldwide, Inc. (CHRW): $500 Million In Share Buybacks Could Send This Stock Soaring]

CHRW leveraged better employee productivity (up 1.1% from Q4, but down 2.8% y/y) and accelerating volume growth to generate better-than-expected net revenue growth (up 6.3% y/y in Q1). However, investors will likely fixate on weaker QTD net revenue growth (up 1% y/y) as rising costs of obtaining capacity overwhelmed the tailwind of 10% y/y NA TL volume growth QTD.

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"Despite the disappointing outlook, we continue to see value in shares of CHRW given its growth potential," the bank wrote in a note.

The Eden Prairie, Minnesota-based company provides freight transportation and logistics services, such as truckload, less-than-truckload, intermodal, ocean, and air freight transportation.

The stock lost 6.56% to trade at $61.58 on Wednesday. In the past 52 weeks, shares have been trading between $60.00 and $82.61.

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