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What to Expect From C.H. Robinson (CHRW) in Q3 Earnings?

C.H. Robinson Worldwide Inc. CHRW is slated to release third-quarter 2017 results on Oct 31, after the market closes.

In the second quarter of 2017, this transportation company’s earnings per share of 78 cents fell short of the Zacks Consensus Estimate of 90 cents. Also, the bottom line decreased 22% year over year due to higher costs and lacklustre performance of the truckload division.

Total revenue improved 12.4% year over year to $3,710 million, surpassing the Zacks Consensus Estimate of $3,590 million.

Let’s see how things are shaping up for this earnings season.

Factors to Consider

We expect C.H. Robinson’s third-quarter results to be hurt by increased costs. Moreover, the company is looking to drive growth through acquisitions. Though positive on the strategy, we note that costs associated with the acquisitions weigh on the bottom line.

In the soon-to-be reported quarter, C.H. Robinson acquired Milgram & Company, in a bid to expand its global network. Costs associated with the integration process are likely to hurt the bottom line.

The transportation unit (comprising truckload, intermodal, less-than-truckload, ocean, air, customs and other logistics services) of the company is likely to disappoint primarily due to weaknesses in the truckload and intermodal sub-groups.

The Zacks Consensus Estimate for third-quarter revenues from the truckload sub-group is pegged at $286 million, much lower than the $309 million reported in the third quarter of 2016. The same from the intermodal sub-group is pegged at $7.5 million, lower than the $7.8 million reported a year ago. The presence of alternative lower cost trucks is likely to hurt intermodal opportunities.

The sourcing unit is, however, expected perform impressively in the to-be-reported quarter. The Zacks Consensus Estimate for third-quarter revenues from this division is pegged at $31.31 million, higher than the $29.82 million reported a year ago. We are impressed by the company’s efforts to reward shareholders through dividends and share buy backs. An update on the issue is expected on the third-quarter conference call.

What Does Our Model Say?

Our proven model too does not show that C.H. Robinson will beat earnings in third-quarter 2017. This is because a stock needs to have both — a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), #2 (Buy) or #3 (Hold) — for this to happen. However, that is not the case as highlighted below.

Zacks Rank: C.H. Robinson carries a Zacks Rank #2. You can see _1link">the complete list of today’s Zacks #1 Rank stocks here.

Zacks ESP: C.H. Robinson has an Earnings ESP of -0.29%, which acts as a spoiler. The Zacks Rank combined with a negative Earnings ESP leaves the surprise prediction inconclusive. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Conversely, we caution against stocks with Zacks Ranks #4 or 5 (Sell-rated) going into an earnings announcement, especially when the company is witnessing negative estimate revisions.

Stocks to Consider

Investors interested in the broader Transportation sector may consider Expeditors International of Washington, Inc.  EXPD, Triton International Limited TRTN and LATAM Airlines Group LTM as our model shows these possess the right combination of elements to post an earnings beat in the quarter.

Expeditors has an Earnings ESP of +1.68% and a Zacks Rank #3. The company will report third-quarter results on Nov 7.

Triton International has an Earnings ESP of +2.04%. The Zacks #3 Ranked company is expected to report third-quarter earnings numbers on Nov 9.

LATAM Airlines has an Earnings ESP of +15.94% and a Zacks Rank #3. The company will report third-quarter 2017 results on Nov 15.

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