Trucker C.H. Robinson Earns More By Earning Less

C.H. Robinson Worldwide, Inc. (CHRW) reported financial results for the quarter ended June 30, 2007. Revenues of 1.88 billion were slightly ahead of the $1.86 billion consensus, and earnings per share of $0.47 were exactly in line with estimates.

In my earnings preview I expressed some concern given Landstar’s (LSTR) recent disappointment. The company was able to grow 15% and expand margins, which ironically was due in part to their slower growth:

As a percentage of gross profits, operating expenses decreased to 58.3 percent in the second quarter of 2007 from 61.6 percent in the second quarter of 2006. This decrease was due to a decline in personnel expenses as a percentage of gross profits from 47.9 percent to 45.4 percent. Expenses related to our restricted stock program and various other incentive plans are based on growth in our earnings. Our slower earnings growth in the second quarter of 2007 compared to the second quarter of 2006 resulted in a decrease in expense related to some of these incentives plans. This contributed to our personnel expenses growing slower than our gross profits.

So by earnings growing slower, they paid out lower bonuses, which in turn helped earnings to grow faster. My head is spinning a bit, likely alongside the heads of those whose bonuses were reduced.

CHRW 1-yr chart: