NAST margins steady on higher rates and lower volumes

On Tuesday after markets closed, C.H. Robinson (NYSE: CHRW), the largest North American third-party logistics provider, announced first-quarter 2021 revenues of $4.8 billion, up 26.3% year-over-year, net income of $173.3 million, up 121.8% year-over-year, and diluted earnings per share of $1.28, up 124.6% year-over-year.

“We are proud of our first-quarter results,” said Bob Biesterfeld, chief executive officer of C.H. Robinson. “As global shipping markets remain disrupted, our team around the globe stayed focused on serving the needs of our customers and delivering innovative solutions to keep global supply chains moving. During the quarter, we delivered strong financial results, while continuing to deliver against many of our initiatives related to growth, productivity and the advancement of our digital strategy.”

Massive rate inflation in truckload and ocean markets coupled with relatively stable gross margins in those modes fueled Robinson’s earnings growth.

C.H. Robinson’s operating businesses mainly fall under two divisions: North American Surface Transportation (NAST), which includes truckload, less-than-truckload and intermodal; and Global Forwarding, which includes air and ocean. The legacy Robinson Fresh business is reported under All Other and Corporate, along with some managed services.

NAST revenues grew 13.7% to $3.2 billion. NAST gross margins held steady at 13.1%, just 10 basis points lower than the first quarter of 2020, enough to deliver $136.7 million in income from operations, up 38.8% year-over-year.

NAST truckload volumes fell 6.5% year-over-year, the second straight quarter of year-over-year declines in truckload volume and the third decline in the past four quarters. But Robinson charged its customers far more to move those truckloads, raising prices by 33% as its own purchased transportation costs increased 33.5%. It’s become clear over the past few quarters that Robinson is growing its less-than-truckload business a bit more aggressively than its truckload portfolio: LTL shipments per day were up 17% compared to a year ago.

A combination of fairly steep reductions in NAST headcount and double-digit growth in less-than-truckload volumes contributed to impressive growth in one of Robinson’s most important productivity metrics, NAST shipments per person per day:

(Charts: C.H. Robinson)

Global Forwarding truly had a banner quarter: Income from operations exploded by 657.5% year-over-year to $90.5 million on gross revenues that grew 118% to $1.15 billion. Gross margins fell to 18.5% from 24.1% in the year-ago period. Ocean volumes were up 27% and air volumes were up 7% compared to the first quarter of 2020. Customs brokerage revenue increased 14.3% on 13.5% higher transaction volumes compared to a year ago.

In the first quarter of 2021, Robinson bought back $150.9 million in shares of its own stock and paid out $70 million in dividends. Capital expenditures were $13.5 million in the quarter, slightly under pace compared to Robinson’s full-year guidance for capex of $55 million-$65 million.