Fundamental Backdrop: Changes in the regulatory environment of the U.S. freight business are taking a enormous % of truck driver driving hours off the road, due in large part to the implementation of strict electronic data logging requirements. These electronic records enforce the cap on the number of hours that U.S. based truck drivers can drive each day/week. Due to this, the supply/demand equation for moving freight is titling heavily in the favor of businesses like C.H. Robinson that benefit from this imbalance. C.H. Robinson is essentially a middle man between businesses needing to move their products and the actual truck drivers who haul the freight. As the truck drivers can demand higher rates, C.H. Robinson's piece of the pie is increasing dramatically. I expect this to show up in a large beat in Q4 revenues and , with quarterly revenues likely to top $3.9 billion for the first time. There is one important question to ask. What will fix this supply/demand imbalance brought on by electronic driving records? The easy answer is more truck drivers, however, retirement rates are currently outpacing the number of new drivers acquiring CDLs. The only real fix I see is driverless trucks, and this is likely 10+ years away. C.H. Robinson seems primed to outperform going forward.
Technical Backdrop: The technical situation seems to be supporting the fundamentals. We have had a long-term consolidation pattern lasting much of the previous five years. CHRW has broken out of this consolidation and moved solidly to the upside, confirming the breakout. On the , C.H. Robinson consolidated the initial gains from the breakout without much selling pressure. This small consolidation is now looking to break to the upside as well, further confirming the new uptrend in the stock.
Minimum Price Target: $120
Likely Price Target: $150
Stop Loss: $77
From Yahoo Finance:
C.H. Robinson Worldwide , Inc. , a third party logistics company, provides freight transportation services and logistics solutions to companies in various industries worldwide. The company operates through North American Surface Transportation, Global Forwarding, and Robinson Fresh segments. It offers transportation and logistics services, such as truckload comprising time-definite and expedited truck transportation services; less than truckload services; intermodal transportation, which is shipment service of freight in trailers or containers by a combination of truck and rail; and non-vessel ocean common carrier or freight forwarding services, as well as organizes air shipments and provides door-to-door services. The company also provides custom broker services; and other logistics services, including fee-based managed, warehousing, small parcel, and other services. It has contractual relationships with approximately 107,000 transportation companies, including motor carriers, railroads, air freight, and ocean carriers. In addition, the company is involved in buying, selling, and marketing fresh produce, including fresh fruits, vegetables, and other perishable items. It offers its fresh produce to grocery retailers, restaurants, produce wholesalers, and foodservice distributors through a network of independent produce growers and suppliers. C.H. Robinson Worldwide , Inc. was founded in 1905 and is headquartered in Eden Prairie, Minnesota.