Market Overview

JPMorgan Starts Bearish Coverage On C.H. Robinson Worldwide

JPMorgan Starts Bearish Coverage On C.H. Robinson Worldwide

JPMorgan has initiated coverage of C.H. Robinson Worldwide, Inc. (NASDAQ: CHRW) with an Underweight rating and $66 price target, saying the logistics company faces a tough road ahead.

The brokerage also added the stock to the U.S. Analyst Focus List as a short idea.

"CHRW faces a challenging road ahead after the end of what we see as a once-in-a-decade combination of margin expansion and truckload (TL) market share gains," analyst Brian Ossenbeck wrote in a note.

Ossenbeck expects 2016 margins to illustrate the cycle peak as historically, "stock performance twelve months after a peak was negative twice as often as it was positive."

Ossenbeck sees margin contraction off the 2016 peak based on improving truckload fundamentals in 2017 and tighter broker spreads in a balanced market, along with a rising diesel price curve.

Related Link: The Market In 5 Minutes: Markets Continue Rally From Friday's Near-Record Close

Further, the analyst said the stock's "valuation and forecasted EPS growth have a strong positive correlation suggesting the current multiple is too high for the PEG ratio to remain within historical norms."

"One-and two-year forecasted earnings growth shows a 0.75 correlation with CHRW's P/E multiple. The stock's average historical PEG ratio on a two-year CAGR is 1.0x, reaching 1.5x in 2009, but it currently trades at 2.4x consensus 2016-18E EPS growth," Ossenbeck highlighted.

The analyst expects 2016 EPS of $3.76 a share versus Bloomberg estimate of $3.78.

"EPS estimates could also be too low, but that outcome appears less likely given we expect a more balanced TL market in 2017 will compress broker spreads as new shipper routing guides narrow the substantial spot/contract rate gap," Ossenbeck said.

Shares of C.H. Robinson closed Friday's regular trading session at $74.43 and were down 1.80 percent in Monday's pre-market session to $73.09 at time of writing.

Did you like this article? Could it have been improved? Please email to let us know!

Latest Ratings for CHRW

Jul 2019DowngradesBuyNeutral
May 2019MaintainsEqual-WeightEqual-Weight
May 2019MaintainsBuyBuy

View More Analyst Ratings for CHRW
View the Latest Analyst Ratings

Posted-In: Brian Ossenbeck JPMorganAnalyst Color Short Ideas Price Target Initiation Analyst Ratings Trading Ideas


Related Articles (CHRW)

View Comments and Join the Discussion!

Citi Analysts Revisit Their Investment Strategy On Crown Castle, Other Wireless Tower Stocks

Make A Quality Query With This Dividend ETF