It isn’t often on earnings calls in 2023 that there is a reference to a fax machine.

But there was on the first analyst call that new C.H. Robinson CEO Dave Bozeman conducted Wednesday after the 3PL’s second-quarter earnings report that was in line or slightly below most forecasts.

Referring to C.H. Robinson reputation for lagging in technology infrastructure, Bozeman said that when he took the offer to head up the country’s largest 3PL, he heard ribbing that “Hey, that’s a fax machine company, right?”

But the statement summed up the challenges that Bozeman faces to improve technology at C.H. Robinson, which he said he so far has found to be more advanced than conventional wisdom might have held.

With the late afternoon earnings call Wednesday, the first responses from the market took a while to roll in on Thursday. 

Shares in C.H. Robinson moved up Thursday at a slightly higher rate than gains in the overall stock market. At approximately 1:45 p.m, C.H. Robinson (NASDAQ: CHRW) was up $1.06 to $98.50, a gain of 1.09%. Earlier in the day, the price had touched a high of just over $100.

C.H. Robinson stock is down about 9.8% for the past 12 months. Its 52-week high was set almost a year ago at $121.23, on Aug. 25.

There were no reports of downgrades or upgrades of C.H. Robinson stock following the call, though there were adjustments to target price projections. The company got its most important good rating news back in June, when S&P Global affirmed its debt rating at the investment-grade level of BBB+, even as it lowered the company’s outlook to negative.

Bozeman did not address the specifics of the quarterly financial performance but rather attempted, as a report from the transportation research team at Wells Fargo said, to “set the tone.”

Bozeman, Wells Fargo said, discussed “speed of results, productivity focus and customer engagement. Although still in ‘diagnosis’ mode, he appears focused on leveraging technology to drive productivity as well as longer-term growth.”

The argument for cutting costs can be seen in the comparison among three key financial measurements in the past year.

Transportation revenues in the second quarter fell 36.8% to just over $4 billion from $6.7 billion in the second quarter of 2022. Meanwhile, the cost of purchased transportation fell by the same percentage to $3.5 million from $5.5 million.

But C.H. Robinson’s selling, general and administrative costs rose 32.8%. While the dollars involved are far smaller — SG&A is less than 4% of all expenses — it’s a cost center that a 3PL has more control over than something like the cost of purchasing capacity.

As TD Cowen’s Jason Seidl noted in a post-meeting report on C.H. Robinson’s earnings, “cost measures were discussed at length on the call.” But so was technology.

“Refinement of CHRW’s digital brokerage offering will remain the fulcrum of the company’s long term cost management initiatives,” Seidl wrote.

Bozeman noted in his comments that he had come out of Amazon’s logistics operations, though his most recent position before joining C.H. Robinson was with Ford. He made several references to “Lean Principles,” the basis of Six Sigma process management.

“Lean Principles are applicable at Robinson to further improve efficiency,” Bozeman said. “Robinson is a strong company. But all companies have waste that can be removed to make a company quicker, more flexible and more agile in solving problems for their customers.”

Bozeman’s Amazon and Lean background, Seidl wrote, “could aid in this endeavor.” Seidl also noted Bozeman’s references to the potential within C.H. Robinson for generative AI, “something the company has not really elaborated on in the past to boost progress in the end to end automation of the order life cycle.” That could take the form of “auto-filled emails and language processing, thus allowing fewer manual touchpoints.”

Seidl, however, was not impressed enough to increase the TD Cowen price target on C.H. Robinson. To the contrary, it had been $95; now it’s $93. 

The transportation research team at Deutsche Bank led by Amit Mehrotra reduced its 2023 earnings-per-share estimate to $3.64 from $3.69 but raised the target price for C.H. Robinson to $91 from $87.

Meanwhile at Bank of America, the team led by Ken Hoexter raised the C.H. Robinson price target to $92 from $85, though it still has the stock rated as “underperform.”

The BOA report said Bozeman is in a “diagnostic phase” with “all options on the table.”

“[Bozeman] sees significant opportunity to accelerate growth, cut waste, drive better customer experience, and leverage CHRW’s scale with Generative AI and machine learning,” Hoexter wrote. “He noted that all portfolio options are on the table to drive shareholder value.”

Concern remains about the company’s Global Forwarding sector, which operates internationally and provides ocean and airfreight services and customs brokerage.

In a report issued after the call, the transportation research team at Morgan Stanley led by Ravi Shanker summed up the dismal performance of the Global Forwarding group, which has long been seen as a laggard at C.H. Robinson. Under the heading of “The Forwarding unwind persists,” Morgan Stanley cited the numbers at Global Forwarding: gross revenues down 63% year on year and 7% less than the Morgan Stanley estimate. Gross margins were up to 23% from 15.5%, Morgan Stanley noted, but that was overshadowed by net revenues down 45% year on year.

Ocean and air volumes were higher sequentially, the Morgan Stanley report noted, but average ocean gross profit year on year was down 49.5% and average air gross profit was down 39.5%.

Hoexter, in his report, said Bozeman “indicated potential strategic options for its Global Forwarding business,” though there was no direct reference to that sector by Bozeman in the call. Hoexter added that Bozeman indicated a “focus centered on opportunities in its core truckload business.”

During the call, when asked about Global Forwarding, CFO Mike Zechmeister discussed some nonfinancial areas of progress. “They’ve done a nice job of bringing some talent and new geographies in and they’re looking at new verticals,” Zechmeister said. “They’ve had a fair amount of success in new trade lines and opening up to some places that they haven’t had a developed business in the past, and they’re getting excellent results.”

That sort of progress was described by Zechmeister as a factor that could get the Global Forwarding business back to a 30% operating margin, which he said was the company’s goal. For the second quarter, the margin was 16.5%. A year ago, in the incredibly strong second quarter, it was 51.6%.

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The post Analysts weigh in on new C.H. Robinson CEO’s 1st earnings call appeared first on FreightWaves.

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