C.H. Robinson earnings fall 45% on narrowest brokerage margins in a decade

[Mike]

North America’s largest third-party logistics provider held the line on trucking volumes but paid for it with profitability.

C.H. Robinson (NASDAQ: CHRW) reported its operating and financial results for the fourth quarter of 2019 after the close on Tuesday.

Robinson reported total revenues of $3.79 billion in the fourth quarter, down 8.3% year-over-year, and net income of $99.1 million, down 47% year-over-year. Earnings per share fell 45.5% year-over-year to $0.73, well below the Street’s consensus expectation of $0.96 per share.

CEO Bob Biesterfeld cited “a quarter of challenging operating results” but noted that Robinson’s brokers were able to adjust pricing and halt the truckload volume slide the company experienced in the third quarter. Less-than-truckload (LTL) volumes even grew 4.5% year-over-year, although volumes for the overall LTL sector were negative.

C.H. Robinson earnings fall 45% on narrowest brokerage margins in a decade (with video)

Robinson aggressively cut prices to hold truckload volumes steady and grow LTL volumes.

www.freightwaves.com

 

[Mike]

I think the large brokers are beginning to feel the hurt of the digital broker age. They better start making adjustments quickly or they will become the Kmart of the Walmart explosion.

 

[Humble pie]

I’m not sure it because of digital brokers or because we’ve had a decade of strong freight and now the market is soft.

 

[Mike]

I’m not sure it because of digital brokers or because we’ve had a decade of strong freight and now the market is soft.

I don't see the market as soft. Freight movement has actually increased, it's just that truck availability increased even more.

The freight is out there, but being one that uses the digital brokers primarily, I have watched them grow their freight base drastically in the past year or two. They do it at a far lower cost to the shipper, while being able to still pay market rates to the carrier.

One thing that is hurting these brokers now is transparency due to technology. It's easy for the shippers to now go to places like Lanehoney and others, see what the typical rates brokers charge to move a load in a specific market, and how much the carrier is actually being paid. In many markets, the shipper can see brokers are hanging to more than 50% of the money.

Doesn't take long for the shippers to realize they are getting ripped off and start seeking alternate shipping methods.

CH Robinson does see the writing on the wall, and they are working very hard on an update to their business model in order to be able to compete with the rapidly growing digital brokerage market. They have acknowledged that they must adapt.

If you pay close attention to the shipping rates, you will notice that they really haven't changed. Shippers have yet to stop complaining about their rates gradually increasing, even though what we have been seeing as carriers has been dropping.

Brokers can lie about this all they want, but the numbers are out there to be seen if one looks closely enough.

• In my local area (northest arkansas), shippers are paying an average of $3.28/mile to move dry van loads to the Chicago area.
• Brokers are moving these loads at an average rate of $1.49 to the Carrier. That's a 55% spread.
• Brokers like CH Robinson, Sureway, Coyote, and others take it an additional cutthroat level and push these loads out on the load boards closer to $1.25/mile. They have to be desperate to come up from this number.

The only people these brokers are fooling at this point are the ones that aren't taking the time to digest these numbers.

Digital Brokers are coming in and slashing that $3.28/mile and managing to surpass that $1.49 to the carrier. It's a win for the Shipper, the digital broker, and most importantly to us the Carrier.

 

[Humble pie]

I have moved one load this week. A whooping 225 miles. The market is terribly soft for me. I understand I don’t run the same freight you do, but all of 2019 was stagnant and 2020 isn’t shaping up to be much better. I have never used a digital broker. I don’t think they are in the oversize market or at least with any sort of presence.

I may be wrong as to the demise of CHR but I don’t believe they are going anywhere soon.

 

[Humble pie]

If you don’t think the market is soft what is it that cause truck availability to go up? I think the influx of new entrants ended sometime last year.

 

[Mike]

I have moved one load this week. A whooping 225 miles. The market is terribly soft for me. I understand I don’t run the same freight you do, but all of 2019 was stagnant and 2020 isn’t shaping up to be much better. I have never used a digital broker. I don’t think they are in the oversize market or at least with any sort of presence.

I may be wrong as to the demise of CHR but I don’t believe they are going anywhere soon.

No, Digital Brokers, as far as I know, haven't found their way into oversize stuff yet. They are easing their way into general flatbed stuff, but I don't think they are touching oversize.

 

[Mike]

If you don’t think the market is soft what is it that cause truck availability to go up? I think the influx of new entrants ended sometime last year.

Not sure. As of July of 2019, the number of new entrants was still coming in at the same pace as 2018. I don't know that it ever really slowed down much.

 

[Mike]

If you don’t think the market is soft what is it that cause truck availability to go up? I think the influx of new entrants ended sometime last year.

Just a quick search, and this one was at the top for freight tonnage.

September 2019, compared to September 2018, freight movement in September 2019 was actually higher than 2018.

ATA Truck Tonnage Index Rose 0.2 Percent in September

Arlington, Va. - American Trucking Associations' advanced seasonally adjusted (SA) For-Hire Truck Tonnage Index increased 0.2% in September after falling 4% in August.

www.trucking.org

 

[Mike]

Really, the only thing I have seen that has changed is that the percentage the brokers are keeping is much higher than 2018.

 

[Humble pie]

Really, the only thing I have seen that has changed is that the percentage the brokers are keeping is much higher than 2018.

I agree that brokers are keeping more.

 

[Humble pie]

Let me ask you this @Mike. Since sites like lane honey gives you the spread that the brokers are offering does that really help negotiations? I mean you can clearly see the spread they are keeping, but does the broker hold their line because they know someone will come in and move it cheaper than you? Or do they appreciate the fact that you aren’t just another blind trucker?

 

[Mike]

Let me ask you this @Mike. Since sites like lane honey gives you the spread that the brokers are offering does that really help negotiations? I mean you can clearly see the spread they are keeping, but does the broker hold their line because they know someone will come in and move it cheaper than you? Or do they appreciate the fact that you aren’t just another blind trucker?

I think it all comes down to the current capacity, and then the individual.

Once you get past capacity, knowing this information can help in your negotiations. It particularly helps me from the house because I can be absolutely stubborn and sit for an additional day if needed.

I have personally found that it is better to hit a broker with around 80% of the typical shipper cost, rather than going to one of the big load boards and pulling their 15 day average and trying to get that. The broker knows what the 15 day average is, and they know if you are hitting them with that number, that you are willing to go lower.

The more information you are armed with, and the better you can speak to these people on the phone/email, the better off you will be at the end of the negotiation.

That said, if there are 50 loads and 100 trucks, they know this and won't entertain your offer most likely. But, that was the carriers fault for allowing their truck into that market unless they took part of that outbound rate into that location with them.

 

[mndriver]

I recommend people get this book and read it.


Freight rates in markets make more sense.

I don't think you're my rates like most people and it shows the way I bid rates versus how somebody else will.

Truckload Transportation: Economics, Pricing and Analysis: Leo J. Lazarus: 9780982784815: Amazon.com: Books

Truckload Transportation: Economics, Pricing and Analysis [Leo J. Lazarus] on Amazon.com. *FREE* shipping on qualifying offers. Truckload Transportation: Economics, Pricing and Analysis covers every facet of truckload pricing including the truckload business model

www.amazon.com

if you want to review it, go to your local library and have them requested from the library of Congress. It'll take about a week to get it and you cannot leave the library with it.

 

[mndriver]

Another freight barometer

The Cass Freight Index: A Measure of North American Freight Activity | Cass Information Systems

The Cass Freight Index is a measure of monthly freight activity, widely used by analysts and economists as an indicator of North American economic trends.

www.cassinfo.com

 

[ironpony]

Well it's good an frickin' soft on the north end of my lane this weekend. Hardly any southbound freight, and one load I called on was a half trailer load, and they expected me to sit on it until Tuesday on real cheap rates.

No thanks!

 

[mndriver]

Well it's good an frickin' soft on the north end of my lane this weekend. Hardly any southbound freight, and one load I called on was a half trailer load, and they expected me to sit on it until Tuesday on real cheap rates.

No thanks!

So change your lane


One doesn't have a semper Gumby philosophy, then you're only hurting yourself

 

[Mike]

Well it's good an frickin' soft on the north end of my lane this weekend. Hardly any southbound freight, and one load I called on was a half trailer load, and they expected me to sit on it until Tuesday on real cheap rates.

No thanks!

I absolutely hate trying to load anything other than a short haul on a Thursday. Most of these loads can be pushed to Friday, the brokers knows it, and they are in no way desperate to move the load. The result? Cheap rates.

 

[ironpony]

So change your lane

Lack of weekend freight is a sign of weakness on this one. I could probably find a load over in Indiana, but the real question is, am I really so desperate that I'm willing to root around in Hillbillianna?



Hmmm....



Nah!

 

[ironpony]

I absolutely hate trying to load anything other than a short haul on a Thursday. Most of these loads can be pushed to Friday, the brokers knows it, and they are in no way desperate to move the load. The result? Cheap rates.

I generally don't have problems with funky crap from shippers on weekend freight, but I definitely hear what you're sayin'.