Buckingham Remains Buyers Of CH Robinson

Buckingham sees about 15 percent upside potential in C.H. Robinson Worldwide, Inc. CHRW, citing gains from market share and balance sheet. The firm lifted the target price from $79 to $81 while retaining a Buy rating on the company's stock.

Analyst Ryan Mueller believes the acquisition of APC Logistics would expand the scale and boost net revenue margin, which were considered by investors, who remain negative. The analyst boosted EPS estimates from $0.87 to $0.90 for the fourth quarter and from $3.77 to $3.87 in fiscal year 2017 to reflect the acquisition.

Mueller doesn't think the company would engage in another acquisition in the current year. However, the analyst thinks there is such a possibility next year in the European market either from freight forwarding or transportation.

"In addition, a 45% return on equity, 26% return on invested capital and ~2.5% dividend yield supports valuing the stock at 21X our 2017 EPS estimate of $3.85. Our upside/downside valuation is $83/$65. Valuation: Our $81 price target reflects 21X our 2017 EPS estimate of $3.85. The stock has traded between 16-23X over the past 4 years and is currently trading at ~18X our 2017 EPS estimate," the brokerage said in a note.

The analyst think C.H. Robinson could deliver positive EPS growth in both 2016 and 2017 with help of asset-light model, which is adaptable. Mueller sees the company's use of capital would fuel multiple expansions in the next six-month period.