C.H. Robinson did two unusual things Thursday.
First, its high-flying stock, driven in part by investor enthusiasm over the 3PL’s embrace of AI, was one of the logistics companies that fell the hardest that day in a sea of red arrows that sucked in trucking firms as well. C.H. Robinson stock was down 14.54% on the day.
(For perspective, C.H. Robinson hit its 52-week high on February 6 at $203.34. Its 52-week low was April 9 at $84.68. It closed Thursday at $179.48.)
The second unusual thing it did was talk about it…sort of.
Companies across the spectrum are generally reluctant to say anything publicly about why their stock is doing well or doing poorly. There are plenty of regulations on “forward looking statements” that company managements strive to ensure they are in compliance.
The statement released by C.H. Robinson (NASDAQ: CHRW) did not specifically address the size of the stock price decline. But it defended its use of AI and looked to the future, saying the company believes continued adoption of AI “will only continue to strengthen our performance and widen our competitive moat.”
But in what could be seen as a subtle boost to the owners of its stock, the C.H. Robinson statement said “we remain confident in our strategy and continue to execute on our disciplined share repurchases from the past year.”
The enormous selloff also hit two other publicly-traded 3PL companies RXO (NYSE: RXO), whose stock already had been falling for a year unlike C.H. Robinson, fell more than C.H. Robinson, down 20.45%. Landstar (NASDAQ: LSTR) declined 15.6%.
Expeditors International (NYSE: EXPD) fell a whopping 13.18%. While it is not an over the road freight broker like RXO or C.H. Robinson, its business is an asset-light company that works to get freight from shipper/manufacturer to an end customer via an ocean or air carrier on assets owned by others.
Although the selloff across markets appeared to be directed at companies whose business can be even further disrupted by AI than what was expected already, both logistics and trucking companies felt the sting of the decline.
Among the trucking companies whose stocks took a big hit Thursday, TFI International (NYSE: TFII) was down 8.11%; Forward Air (NASDAQ: FWRD) fell 8.75%; Werner Enterprises (NASDAQ: WERN) declined 5.34%; Heartland Express (NASDAQ: HTLD) fell 5.75%.
Among the bigger trucking companies, Old Dominion (NASDAQ: ODFL) fell 4.6%, J.B. Hunt (NASDAQ: JBHT) declined 5.06% and Knight Swift (NYSE: KNX) declined just 0.6%.
The S&P 500 fell 1.57% for the day.
Just before 11 a.m. Friday, some of those stocks had rebounded but only a fraction of the prior day’s decline. C.H. Robinson was up 3.42%; RXO was up 2.77%; and Landstar rose 0.81%.
The transportation research team at Baird Equity Research sought to figure out a reason for the decline in a published note.
“The transport complex has come under meaningful pressure this morning for reasons that are not immediately identifiable,” the company said in its research note. “That said, we would note that the weakness appears to be concentrated in the asset-light, technology-enabled brokerage platforms, both in domestic truck brokerage and international freight forwarding.”
It cited four possible causes for the selloff.
The most important, Baird said, was “emerging debate around open-source automation agents such as Molt Bot that offer increased potential to automate routine back-office tasks and help equalize the technology playing field for smaller operators.” The size advantage of companies like C.H. Robinson would presumably shrink if that were to occur.
“Spot rates likely peaking following winter storm Fern and the bomb cyclone before the receipt of tax rebate checks that are expected to be meaningfully higher year-on-year.
The Self-Drive Act, which could speed autonomous trucking.
And a reason that might seem counterintuitive: the FMCSA final rule on non-domiciled CDL holders. Some interpretations of the law have concluded that it will not reduce capacity as quickly as might have been expected.
Baird’s note was primarily to express skepticism as it reiterated its Outperform rating on several stocks.
“Automation is not a new theme,” Baird said. “The digital brokers automated in the 2010-2015 period, but service dependability was lacking as was their ability to leverage high execution predictive analytics. Successful execution in digital brokerage requires a best in class data set, built over years across cycles. Only the large tech-enabled players like CHRW and EXPD possess that breadth and depth of shipment, pricing, and carrier performance data to deliver. Security is also a growing focus.”
A similar research note from the transportation research team at Barclays reiterated its Overweight rating on C.H. Robinson in addressing the causes for the selloff.
Its note linked to a tweet from the co-founder at Open Mercato regarding a freight management system built on Open Mercato. Barclays said it believed the promise inherent in this tweet from Tomasz Karwatka was a key driver in the decline in transportation stocks, particularly the 3PLs.
Barclays also suggested a press release from Algorhythm Holdings (NASDAQ: RIME) that its SemiCab platform “in live customer deployments” was able to “scale freight volumes by 300% to 400% without a corresponding increase in operational headcount” was a factor in the selloff.
Algorhythm released a white paper on its findings in conjunction with the press release. (A link to the white paper was not functional early Friday).
But Barclays said the key disruptor in transportation logistics remains C.H. Robinson.
“We see the moves in asset-light transportation stocks as disproportionate to the risk and would be significant buyers of weakness, especially in CHRW shares,” it said.
C.H. Robinson’s statement repeated many of its own boasts about where it stands in the cycle of AI adoption. It wrapped up its defense by alluding to its financial position without mentioning the stock price.
“Our leadership in AI enhances the already strong fundamentals of our company,” C.H. Robinson said. “We have outperformed the freight market for eight consecutive quarters. Our strong balance sheet, liquidity and investment-grade credit rating allow us to continually invest in innovation, even when competitors can’t, while also buying back our stock. We are a dividend aristocrat, returning higher dividends to our investors for 27 consecutive years.”
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