JPMorgan Downgrades C.H. Robinson, Citing Macro Risks

JPMorgan, which is a subsidiary of Morgan Stanley, has predicted a difficult road ahead for C.H. Robinson in 2023.

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The stock was downgraded to underweight from neutral by analyst Brian Ossenbeck. Despite an improving industry outlook in 2023, rail congestion fees, truckload rate cycles, and coal volumes will be headwinds for the company. 

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“It remains vulnerable to the spread between contract and spot truckload rates, contract negotiation timing, and overall freight market demand in C.H. Robinson's North American Surface Transportation segment,” the analyst said.

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C.H. Robinson posted disappointing earnings and revenue earlier this month, prompting the downgrade.

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Analysts noted that C.H. Robinson is more exposed to macro risks than some of its competitors, including RXO.

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“Throughout the last two quarters, Robinson’s truckload volumes have underperformed their typical Cass Freight benchmark as its brokerage volume grew by 4% YoY,” the analyst said.

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Despite falling more than 14% last year, the stock has increased by 13.3% in 2023.

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While JPMorgan thinks that there are still significant downside risks to the stock, despite its recent gains, Ossenbeck reiterated his price target of $87.5, which implies a 16.1% downside from the stock's closing price of $48.54 on Thursday.

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“The 4Q22 earnings call did not leave much to be desired after management indicated the current strategy would remain the same and the Global Forwarding business would not be sold anytime soon, despite the firing of the former CEO (who opposed the sale at the beginning of 2023),” said Ossenbeck.