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

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.

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.” Insurance 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–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.

“As a reference, we’ve been absorbing approximately $30 million of annual wage inflation, and we’ve still delivered double-digit earnings growth in 2024 through 2026,” Bozeman said. 

Can you clarify that?

That led UBS analyst Tom Wadewitz of UBS to ask Lee for a “clarification.” 

“You said that $30 million of inflation and compensation and benefits you absorb every year, are you trying to imply like we should assume that the increase in insurance would be less than that $30 million or that magnitude?” Wadewitz said. “It seemed like you might be implying that with the way you presented that comment.”

Lee said the $30 million comparison by Bozeman and himself was “provided..as an example of magnitude, just so you guys can get your head around the headwinds that we absorb every day and never talk about.”

“We’re built to offset headwinds, we’re built to absorb inflation and still deliver demonstrable results,” Lee said. “So we thought that was a pertinent example to give, just to give you some context around how our inflation on insurance is not going to be something that derails our earnings trajectory going forward.”

Not a big deal

Lee, at another point in the call, repeated that insurance increases were not a significant threat to C.H. Robinson’s basic finances. 

Lee said C.H. Robinson usually benchmarks its total insurance and claims expenses as 50 basis points of its total gross revenue. Year to date, he said, C.H. Robinson is below that number, even though third quarter numbers were relatively elevated.

Lee in a post-analysts call interview with FreightWaves, said insurance expenses as measured against gross revenue are “de minimis.”

“While our claims expenses are typically linear throughout our year, periodically, some quarters are higher than others, as demonstrated in Q3,” Lee said on the analysts’ call. “We typically look at these types of expenses on a longer trajectory than certainly one quarter, and we’re still well within that guidance.”

Hearing about it by the end of the year…possibly

Bozeman added that the insurance renewal process will be completed by the end of December, “and we will share an update on our 2027 insurance costs as soon as we can.”

The disclosure on the level of insurance increases in 2027, which are now likely to be anticipated to an almost manic degree, will likely come in mid-to-late December, Bozeman said. That is generally the time “when we get finality on what the insurance police will look like.”

He added that this year, the company is trying to get those nailed down sooner rather than later. Bozeman added he hoped the information would be available before the company’s next earnings call.

But he reiterated that insurance costs are not going to be a headwind for C.H. Robinson. 

“We still  feel very good about those proceedings,” Bozeman said of the insurance negotiations “We’ve said multiple times that we feel like the outcome will be close to industry leading, if not industry leading, and we certainly don’t feel like the inflation on those those costs will be anything that will derail earnings going forward.”

Bozeman reiterated a point he has made separately: “We continue to manage our legal docket as we have for years, with most cases being either dismissed or settled for amounts below our deductible.”

Issues at Landstar

On the Landstar call with analysts, CFO Jim Todd said “claim cost severity has been going up at a decent clip that we felt like for a period of years that (reserves) were sufficient.” 

However, the category of incurred but not reported reserves were up 27% in terms of gross dollars from the fourth quarter of 2022 to the fourth quarter of 2025 at Landstar, Todd said, “and that’s on a declining truck count.”

Todd spelled out several metrics that showed how much Landstar’s insurance costs have risen. “We want to continue to book those higher loss estimates prospectively,” he said. 

He did say two claims in the second quarter were in federal jurisdictions where there previously had been protection for brokers under the Federal Aviation Administration Authorization Act that was eliminated as a protection for brokers by the decision in Montgomery vs. Caribe Transport II. 

Todd was asked about future estimates going forward but he demurred. “This is a highly complex environment to estimate insurance and claim reserves,” he said, adding that previous guidance on the percentage of revenues from the company’s business capacity owners (BCOs) that should go for claim reserves will no longer be disclosed.

RXO’s docket

Although the call was the first since the C.H. Robinson acquisition of RXO was announced, that subject took up relatively little time with analysts.

However, given the insurance and legal backdrop of the third quarter earnings, one aspect of the acquisition did come up: the legal landscape faced by RXO.

Bozeman reiterated a point made when the deal was announced that “RXO’s legal docket is a neutral factor when compared to our own docket. And like us, RXO has a significant insurance tower for contingent auto liability claims. 

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