Freight Downturn Puts C.H. Robinson's Net Operating Margins to the Test

C.H. Robinson dominates the $90 billion-plus asset-light truck brokerage market, and its immense network of shippers and asset-based truckers supports a wide economic moat, in our view. Although the firm isn't immune to freight downturns, its variable-cost model historically helps shield profitability during periods of lackluster demand, as evidenced by a long history of above-average profitability. The firm's ownership of transportation equipment is minimal, and a large swath of operating expenses are tied to performance-based variable compensation, which tends to move with net revenue. We think the company remains well positioned to capitalize on gradual truck brokerage industry consolidation (including market share gains) despite intensifying competition.