C.H Robinson and Landstar stock prices slammed; insurance a factor

(Editor’s note: the initial article has been revised to note that the companies discussed increased claims, not insurance premiums). Strong financial numbers released between Tuesday and Wednesday by C. H. Robinson and Landstar were overshadowed on Wall Street by concern over one particular issue: insurance and claims.

Landstar kicked off the issue Tuesday afternoon with its third quarter earnings release that showed heavier than usual claims charges. window. googletag = window. googletag || {cmd: []}; googletag. cmd. push(function() {var gptSlot = googletag.

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Robinson (NASDAQ: CHRW) 3Q earnings, while not being as specific as the Landstar (NASDAQ: LSTR) report on the individual hits that elevated claims, did provide data that showed its claims were abnormally high during the quarter.

Coming in a six-month period in which the broader long-term risk of insurance costs rising was driven home by expanded broker liability exposure due to Montgomery vs. Caribe Transport II, and a whopping nuclear verdict that hit C. H. Robinson in Lipe vs.

Lupus Superior and its subsequent affirmation by a Dallas County judge, the insurance aspects of otherwise solid earnings appeared to lead investors to effectively nullify otherwise strong financial reports. One other negative factor cited by analysts for the slide at C. H. Robinson: operating cash flow fell to $124. 1 million compared to $275.

4 million a year ago. But that was sequentially an improvement from the second quarter figure of $35. 9 million. The third quarter figure was said by C. H. Robinson to have been caused by “unfavorable changes in working capital driven by higher transportation rates.”

The transportation research team at Deutsche Bank cited several factors for the stock slide at C. H. Robinson, including its North American Surface Transportation gross margin compared to its peers within truckload carriers. The numbers at the end of the day For the day, C. H. Robinson stock was down 11. 14% or $15. 99 to $127. 60.

It marked a continuation of a slide that saw the price reach $210. 33 on July 22 and was as high as $158. 35 at the start of October For Landstar, its stock closed down 17. 76% or $29. 98 to $138. 80. Its 52-week high was $228. 46 on June 8. window. googletag = window. googletag || {cmd: []}; googletag. cmd. push(function() {var gptSlot = googletag.

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document. hidden) {googletag. pubads(). refresh([gptSlot]); } }, 60000); }); googletag. cmd. push(function() {googletag. display('div-gpt-ad-1665767553440-0'); }); On the C. H. Robinson earnings call with analysts, several on the call asked a significant number of questions about the issue of insurance claims.

It was a sign of a selloff that occurred despite a quarterly report that on its surface probably should have been at least neutral to the price. What may have spooked C. H. Robinson investors was the company’s disclosure in its earnings report that its Selling, General & Administrative (SG&A) expenses were up 29.

7% from a year earlier, “primarily due to higher claims expenses” though the company also had a real estate impairment charge. Insurance and claims costs at C. H. Robinson are in the SG&A category. CFO Damon Lee said SG&A for the year is expected to be $585 to $590 million compared to an earlier estimate of $540 to $580 million.

While that is not all insurance or claims–Lee said depreciation and amortization will push that figure up as well–the comment appeared to have caught analysts off guard compared to their own estimates of C. H. Robinson’s insurance costs. Adding to that, CEO Dave Bozeman said in his introductory remarks on the earnings call that C. H.

Robinson is “progressing nicely” through the 2027 insurance renewal process, “and we believe this renewal will result in insurance inflation that is reasonable and manageable.” But Bozeman added to that an example of inflation that may have been interpreted by the analysts as signaling a higher inflation rate for insurance costs than they anticipated.

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