C.H. Robinson Worldwide is reaping the benefits of its $365 million acquisition of Freightquote last year, as well as earlier acquisitions that expanded its scale and footprint in North America and globally.
Freightquote, an online freight broker, gave C.H. Robinson’s sales a significant boost in the second quarter, adding to its net truckload revenue and especially less-than-truckload net revenue.
Freight volumes also increased in C.H. Robinson’s truckload, LTL and intermodal sectors in the second quarter, as shippers flocked to the company to secure capacity in advance of feared shortages, John G. Larkin, a managing director at equity research firm Stifel, said.
After truck supply tightened in 2014, “it appears that shippers are turning more and more of their transportation requirements over to the company in anticipation of what could emerge as a severe capacity crisis later in the current decade,” Larkin said in a July 29 note to investors.
An increase in the company’s international net revenue and income from other logistics services, including warehousing, managed services and small parcel shipping, also points to increased shipper interest in outsourcing more logistics and transportation responsibilities. The company can thank the $635 million acquisition of forwarder Phoenix International in 2012 for more rapid overseas growth.
In North America, the company’s truckload volumes rose 7 percent from the year ago quarter. That’s significant increase considering the exceptional strength of freight demand in the second quarter of 2014, when the polar vortex retreated and ice-jammed supply chains accelerated double-time.
C.H. Robinson was able to ride the wave of contractual truck rate increases, increasing the rates it charged shippers 3 percent on average, excluding fuel surcharges, a drop from 6 percent in the first quarter. The logistics company’s truckload costs rose 2.5 percent, excluding fuel.
Shipper demand was evident in the increase in the $11.9 billion 3PL’s net revenue after making payments from gross revenue to its suppliers. "We had a great quarter with strong net revenue and net income growth across our network," CEO John Wiehoff said in a statement.
The largest U.S. third-party logistics operator, C.H. Robinson increased total net revenue 12.1 percent year-over-year in the quarter to $584 million. The Eden Prairie, Minnesota company attributed 7 percentage points of that growth, which totaled $63 million, to its Freightquote division.
Total or gross revenue rose a much more modest $42.2 million, or 1.2 percent year-over-year, to $3.55 billion in the quarter. Lower fuel prices and plummeting fuel surcharges also contributed to the higher net revenue and improvement in net margins across the company’s divisions.
C.H. Robinson’s operating profit increased 14.3 percent from the year-ago quarter to $229.1 million, while net profit rose 15.7 percent to $137.2 million. The company beat Wall Street earnings forecasts, sending its stock price up more than 5 percent by mid-morning July 29.
The contribution of Freightquote to that “earnings beat” was felt throughout the company.
Freightquote added 3.5 percentage points of growth to truckload net revenue, which climbed 8.6 percent year-over-year to $334.5 million. And the division, heavily focused on LTL shipping, accounted for 33 percentage points of a 35.8 percent increase in LTL net revenue to $91.5 million.
About 3 percentage points of the 7 percent increase in truck volumes was attributed to Freightquote. LTL volumes rose 33 percent, with 20 percentage points of that increase sourced from Freightquote. The division also brought in smaller customers with higher-margin freight.
When it came to net intermodal revenue, Freightquote contributed 9 percentage points to a 6.2 percent increase in net intermodal sales, C.H. Robinson said July 28. Excluding Freightquote, intermodal shipping transactions declined in the quarter from the same period a year ago.
On the international front, C.H. Robinson increased ocean and customs revenue as it expanded its Global Forwarding network. Ocean transportation net revenues rose 17 percent to $59.1 million, while international customs net revenue climbed 6.4 percent to almost $11 billion.
Air forwarding net revenue dropped 9.9 percent to $19.6 million, mostly due to lower rates, C.H. Robinson said. Air freight volumes and net revenue margin increased slightly, the company said. Combined air and ocean forwarding and customs net revenue rose 8.6 percent to $89.6 million.
Net revenue from other logistics service increased 22.6 percent to $21.1 million, with revenue from managed services provided to shippers contributing most of the $3.9 million gain.
The second-quarter trend toward stronger revenue, despite tough comparisons with a strong second quarter in 2014, continued in July, with net revenue rising about 12 percent year-over-year in that month, C.H. Robinson told investment analysts during a July 29 conference call.
Shipper concerns over truck driver shortages, intermodal rail service and the increasing complexity of supply chains are expected to propel logistics revenue growth in coming years. Last year, total U.S. 3PL revenue expanded 7.4 percent to $157 billion, and the 3PL market should approach $200 billion by the end of 2018, according to logistics research firm Armstrong & Associates.
As the economy grows, 3PLs such as C.H. Robinson, which accounted for 24 percent of U.S. domestic transportation management revenue in 2014, according to Armstrong & Associates, may hold the keys to capacity.