Analyst: Little Upside Remains For C.H. Robinson Shares

BMO Capital Markets downgraded shares of C.H. Robinson Worldwide Inc (NASDAQ: CHRW), citing the recent recovery in the stock price and its hesitant attitude toward using a higher multiple given growing competitive intensity in the brokerage markets, which rendered the visibility into long-term earnings per share and return on invested capital weak.

As such, the firm downgraded shares of C.H. Robinson from Outperform to Market Perform but raised its price target from $ to $77

At time of writing, C.H. Robinson shares were down 1.02 percent at $76.51.

Analyst Fadi Chamoun expects C.H. Robinson's third quarter results to improve from a very weak second quarter, as alignment between pricing to customers and the company's transportation costs begins to improve, particularly in the truckload segment.

The analyst sees the improvement as a function of greater focus on profitability over volumes and the gradual repricing of contracts.

See also: The Scope Of Amazon's Whole Foods Deal: Carrier's Gain Is Parcel Deliverer's Loss

Specifically, BMO Capital Markets expects third-quarter net revenue growth of 2 percent, as comparisons get easier starting this quarter. The firm also expects the cyclical tailwinds from a tightening truck market to continue to support net revenue growth, going into 2018, with the pace of improvement likely to be more second-half weighted, and into 2019, as more contracts are repriced.

"Truck markets have tightened at a faster pace than we had anticipated as a result of a stronger demand environment and, in part, due to recent storms, which weighed on truck capacity," the firm said.

Accordingly, the firm increased its 2018 and 2019 estimates by 3.3 percent and 3.1 percent, respectively.

Following the upward adjustment of estimates, the firm raised the price target on the shares of C.H. Robinson to $77, valuing them at 20 times forward earnings per share. The firm also said applying the same multiple on its 2019 outlook supports a potential upside to $80.