C.H. Robinson speaks to investors – and Wall Street’s support soars anew

NEW YORK – The biggest hit on Broadway Thursday was the CEO of C.H. Robinson.

It was not only David Bozeman’s first investors day event in New York as CEO of the 3PL, a position he assumed in June 2023 , but it also was C.H. Robinson’s first such gathering in seven years and featured the company ringing the opening bell on Nasdaq.

Based on the reaction among investors, the message that Bozeman and other members of C.H. Robinson’s (NASDAQ: CHRW) management team delivered resonated strongly.

The stock price for the biggest U.S.-based 3PL was up 4.52% Thursday, a gain of $4.93 to $114.06. That number is just below the 52-week high recorded earlier in the day at $114.68. On Friday, the stock was down a little less than 1% in early trade.

Since a surprise strong earnings report for the first quarter sent the company’s stock soaring on May 1, stunning a large number of traders who had a big short position in C.H. Robinson stock that suddenly needed to be covered, gains since then are hovering near 60% to date.

Projections on incremental operating income

Some of what Bozeman and his team told the investors were hard numbers. In an interview with FreightWaves following the event, Bozeman said the day’s program had saved CFO Damon Lee for last to drive home the company’s forecast that by 2026, “we’re going to drive between $350 million and $450 million in incremental operating income.”

Lee was the last presenter at the closed meeting, after the investors had heard Bozeman and other executives discuss the future. “I think there was some believability after we got to two hours, ultimately culminating in this,” Bozeman said.

For the nine months through Sept. 30, C.H. Robinson recorded operating income of $485.3 million. In a tough 2023, operating income was $514.6 million.

Earnings calls with Bozeman have tended to focus on cost-cutting and technology improvements. But at the investors meeting and in the interview, Bozeman talked about market growth – in particular, grabbing back market share in the small and midsize business sector.

“We laid out a growth story to say, how are we going to grow and what are we leaning into?” Bozeman told FreightWaves. He added that C.H. Robinson largely ceded the SMB market to other companies in 2018-2019, “and we showed a path to say, this is why we’re going to go after the SMBs.”

Targeting smaller companies, once again

The move several years ago to focus less on SMBs, Bozeman said, was concurrent with the rise of digital brokerages.

“At that time, the company made a decision when they were faced with an onslaught of digital entrants,” Bozeman said. The plan was to try to match those efforts with C.H. Robinson’s own digital brokerage tools, but Bozeman said those offerings “weren’t that good, with poor service, which is not what Robinson is known for. Our SMB customers did not like that, and they went elsewhere.”

Only about 5% of C.H. Robinson’s bookings then were fulfilled digitally, Bozeman said.

That figure now is about 50%, Bozeman said, and “we know our technology is that robust and it’s market-leading, so you get a great experience at a much higher digital booking that is going to help drive part of our growth story, because it also helped us with our productivity story as well.” Current year-on-year growth rates in the SMB sector are in the single digits, he said.

Bozeman did not mention another change in the landscape: Many of those digital offerings have struggled, with Convoy closing last year and Uber Freight (NYSE: UBER) still trying to find consistent profitability.

The renewed push into SMBs is not the only strategic move Bozeman discussed at investors day. (The event was closed to the media but was the focus of the interview with FreightWaves.)

Other paths to growth

The “second growth story” discussed at the gathering, Bozeman said, was an increasing push in several “verticals” where C.H. Robinson sees opportunities. He cited energy, health care, retail and automotive, “where we’re going up the value stack to get more total addressable markets.”

Moving somewhat to a more asset-based model is one of the strategies the company will pursue in those verticals, Bozeman said. Specifically, the 3PL has a trailer pool of more than 2,000 units and access to more than 10,000 with various partners. “That allows Robinson to show up like an asset, but we don’t have the costs like an asset,” he said.

C.H. Robinson has had numerous rounds of job cuts during Bozeman’s time, and before. Asked if the layoffs at C.H. Robinson were “done” – as much as changes in head count at a company can ever be done – Bozeman described personnel decisions as a “continuum. When you’re into a lean operation, nobody ever stops.”

But Bozeman said several times during the interview that cost-cutting can only go so far on the road to greater profits, and he returned to the long-term theme that has dominated the company’s earnings calls: technology gains.

Bozeman reiterated Friday in an interview with CNBC his emphasis on the gains that AI in general and generative AI in particular can give to a company like C.H. Robinson. The goal is increased productivity, which he said is best measured by shipments per person per day. C.H. Robinson saw gains of 15% in that benchmark last year and expects to do that this year, Bozeman said.

Bozeman characterized such points as “physicals” and said they were “evergreen.” “We’ve changed the physical cost structure of what we’re doing,” he said.

The surge in C.H. Robinson’s stock was accompanied by several analyst reports reflecting the support that led to the higher equity price. For example, Jason Seidl said at TD Cowen that he was raising his firm’s earnings per share on C.H. Robinson to $4.90 for next year from $4.80 and to $5.80 from $5.50 in 2026.

Adjusted EPS for C.H. Robinson last year was $3.30.

Increasing the NAST operating margin

Prior to the meeting, the transportation research team at Wells Fargo said technology changes being implemented at C.H. Robison should drive a return to an operating margin of 40% at its North American Surface Transport segment, which is where its brokerage activities are based. In the fourth quarter, NAST operating margin was 35.4%.

Asked if that 40% target was reachable, Bozeman said, “We’re going to do that.” A 40% margin would be about the middle of what C.H. Robinson described as “midcycle,” or a market bounce that is solid but not spectacular, while the company would be higher than that if the market was “high cycle.”

With the recent record of layoffs, TD Cowen’s Seidl summed up the message given in the investor meeting about head count: “an approach that blends human oversight with matching technology … another sign that the industry is stepping away from a tech exclusive platform. Customized service is back in focus.”

Bozeman stressed that human element in the interview. “You can’t solve a trailer on fire or a flat tire with the wrong equipment” with technology alone. “People get on the phone and say, ‘I need this fixed.’ So we’ve got that balance to say we’re going to have people who are really good with what they do enabled by a tech stack that is the best in the industry.”

Other notable observations by Bozeman in the interview.