What happened
High costs tripped up C.H. Robinson Worldwide (CHRW 3.94%) in the fourth quarter, and the stock is trading off as a result. Shares of the provider of multimodal transportation services and third-party logistics were down as much as 11.5% on Wednesday following a miss on earnings per share.
So what
On Thursday morning, C.H. Robinson reported fourth-quarter earnings of $1.74 per share on revenue of $6.5 billion. The revenue came in more than $200 million ahead of expectations, but the earnings fell short of the $1.85-per-share consensus.
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The results reflect the current environment in the shipping industry. Demand is elevated, leading to strong pricing power and revenue, but costs are eating into much of those gains. Robinson reported operating costs were up 31.2% year over year, driven by personnel expenses up 35.8% from the fourth quarter of 2020. Revenue, meanwhile, was up 42.9% year over year driven by higher prices and volumes.
"In the face of some of the greatest disruption and tightest capacity the logistics industry has ever seen, C.H Robinson demonstrated strength, resilience and commitment to our global customers in 2021," CEO Bob Biesterfeld said in the earnings release.
Now what
The pricing power is expected to continue into 2022, and Robinson is doing what it can on costs. The company is relatively asset light, serving more as a broker than as an actual transporter, and it has been trying to use technology to deliver better solutions to its customers at a lower cost.
Robinson said that volume from its tech-based pricing tools increased 153% year over year in 2021, accounting for $875 million in revenue. But that is just a small fraction of the company's $23.1 billion in revenue for the year.
Unfortunately, those initiatives will take time to mature, and there isn't much C.H. Robinson can do in the near term other than ride out the storm. This is a best-in-class operator that should deliver for investors over the long haul, but the macro headwinds were too much for the company to overcome in the final three months of 2021.
