Despite solid quarterly financial performances, investors in the stock market were not reassured as C.H. Robinson and Landstar faced heavy selling pressure following the release of their third quarter earnings. It wasn’t the headline profits that were the problem, but the surprise size of insurance claims and what it could mean for future operating expenses.
Landstar first signaled the issue Tuesday afternoon as its third-quarter report showed claims expenses higher than normal. C.H. Robinson later reported that its own claims costs had also climbed to unusually high levels during the quarter, although its report offered less detail about the individual claims responsible for the increase.
The market reaction mirrored increasing investor sensitivity to insurance related risks in the freight transportation and brokerage industries. Both companies are operating in a legal environment in which brokers may face increased liability exposure and it is unclear what the long-term effect on insurance costs and profitability could be.
Good numbers, but worries on insurance side
The latest earnings reports came on the heels of growing legal uncertainty for freight brokers. In the six months prior, concerns had been rising about possible insurance inflation following the US Supreme Court decision in Montgomery v. Caribe Transport II, which increased the exposure of brokers to certain liability claims.
The nuclear verdict in Lipe v. Lupus Superior also hurt C.H. Robinson, which was later upheld by a judge in Dallas County. These trends have raised concerns about the financial impact of litigation and the possibility of higher insurance costs across the industry.
By that measure, investors seemed more focused on the companies’ claims costs than on their otherwise robust financial results.
Another element that analysts at C.H. Robinson pointed to was the deterioration in operating cash flow. The company had operating cash flow of $124.1 million for the third quarter, compared with $275.4 million in the year-ago quarter. Still, it was up sequentially from $35.9 million in the second quarter.
C.H. Robinson attributed the cash flow figure in the quarter to “unfavorable working capital changes due to higher transportation rates.”
Deutsche Bank’s transportation research team also noted several reasons for the decline in C.H. Robinson’s share price, including how its North American Surface Transportation gross margin has performed relative to its truckload carrier peers.
Investors re-evaluate risk, shares tumble
Both companies were punished by the market.
C.H. Robinson shares fell $15.99, or 11.14%, to close at $127.60. The decline extended a downward trend that started when the stock reached $210.33 on July 22. By the beginning of October, the share price had dropped to around $158.35.
Landstar fell even lower. Shares fell 17.76%, or $29.98, to close at $138.80. The stock touched a 52-week high of $228.46 on June 8.
That was particularly interesting in light of the overall quarterly results, which otherwise might have been expected to generate a neutral market reaction.
Analysts hounded management with questions about insurance claims and associated costs on the earnings call. Selling, general and administrative (SG&A) expenses rose 29.7% year over year, adding to worries.
C.H. Robinson said the increase was mostly due to higher claims expenses but was also affected by a real estate impairment charge. Insurance and claims costs are included in SG&A expenses for the company.
Higher SG&A guidance raises more questions
The company now expects selling, general and administrative expenses for the full year to be between $585 million and $590 million, up from its previous forecast of between $540 million and $580 million, Chief Financial Officer Damon Lee said.
Insurance and claims weren’t the only changes to the outlook. Lee also pointed to depreciation and amortization as factors that he expected to contribute to the increase. Still, the raised guidance seemed to surprise analysts, particularly when compared to their own estimates of C.H. Robinson’s insurance costs.
Chief Executive Officer Dave Bozeman tried to reassure investors that the company’s insurance renewal talks for 2027 were moving ahead nicely.
In his introductory remarks, Bozeman said C.H. Robinson was “progressing nicely” through the renewal process and that the outcome should lead to reasonable and manageable insurance inflation.
But his comparison with another routine cost hike cast doubt on the size of the expected insurance adjustment.
The company had absorbed about $30 million in annual wage inflation, Bozeman said, but still posted double-digit earnings growth from 2024 through 2026.
The comparison was intended to show how C.H. Robinson can handle inflationary pressures. But it also raised questions as to whether the next insurance renewal could bring a similar magnitude increase.
Management comments on $30 million comparison
UBS analyst Tom Wadewitz asked Lee to clarify whether the $30 million reference to annual compensation and benefits inflation meant the expected rise in insurance costs would be smaller or comparable.
Lee said the figure was given just as an example of the scale of inflationary pressures the company regularly absorbs.
C.H. Robinson has built its operating model to absorb cost increases while protecting financial performance, the CFO said. That analogy was meant to provide perspective, not be a specific forecast of insurance costs.
Management also did not expect insurance inflation to throw the company’s earnings trajectory off course, Lee said.
His comments were meant to clarify the immediate effects of the higher quarterly claims versus the longer-term financial effects of the process of renewing the insurance.
C.H. Robinson: Insurance costs still controllable
Lee later echoed the sentiment, saying insurance expenses were not a major threat to the underlying financial position of the company.
C.H. Robinson generally benchmarks its combined insurance and claims costs at 50 basis points of total gross revenue. “even with the relatively high expenses in the third quarter, the year-to-date figure was still below the benchmark,” Lee said.
“Insurance as a percentage of gross revenue is de minimus,” Lee said in a post-earnings-call interview with FreightWaves.
He also said claims expenses don’t necessarily follow a perfectly consistent pattern through the year.
“Claims expenses tend to be linear through the year, but there are some quarters that are higher than others, as we saw in Q3,” Lee said on the earnings call.
“Usually the company looks at these costs over a longer time horizon and doesn’t draw conclusions from one quarter. C.H. Robinson still was well within its existing guidance, Lee said.
The message from management was that the third-quarter increase was not an indication of a fundamental deterioration in the company’s cost structure but rather should be seen in the light of the company’s overall financial performance.
2027 insurance renewal figures expected by year-end
Investors are now waiting for greater clarity on the cost of C.H. Robinson’s insurance coverage for 2027.
Bozeman said the renewal process was expected to be completed by the end of December, with the company planning to provide an update on its insurance costs as soon as possible.
He indicated that the final figures would most likely become available in mid-to-late December, when the company generally receives definitive information about the terms of its insurance policies.
This year, management is seeking to finalize the process earlier than usual. Bozeman said he hoped the company would be able to communicate the outcome before its next earnings call.
Given the market’s reaction to the latest quarterly disclosures, the forthcoming update is likely to attract considerable attention from analysts and investors assessing the company’s future cost structure.
Nevertheless, Bozeman reiterated that management remained confident about the negotiations and did not expect insurance inflation to undermine future earnings.
“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 costs will be anything that will derail earnings going forward,” he said.
The CEO also reiterated that C.H. Robinson continued to manage its legal cases as it had for years, with most matters either dismissed or settled for amounts below the company’s insurance deductible.
Landstar acknowledges increasing claims severity
At Landstar, management’s comments highlighted a different aspect of the insurance challenge: the growing severity of claims and the need to reassess the reserves set aside to cover potential liabilities.
During the company’s earnings call, Chief Financial Officer Jim Todd acknowledged that claim costs had been increasing at a significant pace. For a period of years, management had considered its reserves sufficient, but the evolving claims environment has prompted a reassessment.
Todd said Landstar’s reserves for incurred but not reported claims increased by 27% in gross dollar terms between the fourth quarter of 2022 and the fourth quarter of 2025. That increase occurred despite a declining truck count.
The figures point to growing pressure on the company’s insurance-related liabilities, even as its operating fleet contracted.
Todd outlined several metrics illustrating the increase in insurance costs and said Landstar intended to continue recording higher loss estimates prospectively.
The comments suggest that the company is adjusting its reserve assumptions to reflect the changing severity of claims and the uncertainty surrounding future liabilities.
Landstar’s Reserve Estimates Complicate Legal Developments
Todd also discussed two claims from the second quarter that were brought in federal jurisdictions where brokers had previously benefited from the protections of the Federal Aviation Administration Authorization Act.
Those protections were stripped from brokers in the situations addressed by the Supreme Court’s ruling in Montgomery v. Caribe Transport II, adding yet another layer of uncertainty to the analysis of potential liabilities.
Asked about future estimates, Todd said insurance and claims reserves are difficult to predict in the current environment.
Landstar also said it will no longer provide its previous guidance on the percentage of revenue from its business capacity owners, or BCOs, that should be set aside for claims.
The ruling restricts access to one disclosed metric that investors could use to estimate the company’s expected costs related to claims.
Landstar’s comments thus reinforced a broader worry that has been emerging from the two earnings reports: The financial impact of claims is getting harder to predict, and the possible fallout from legal developments is still unclear.
RXO acquisition raises additional legal issues
The earnings call also gave a chance to talk about C.H. Robinson’s announced acquisition of RXO, although the deal took little time during the analyst discussion.
But the legal atmosphere around the deal drew scrutiny, especially in light of the insurance issues that emerged in the third-quarter results.
Bozeman reiterated management’s belief that RXO’s legal case portfolio was a wash against C.H. Robinson’s own legal exposure.
RXO, like C.H. Robinson, also has a big insurance tower to cover contingent auto liability claims, he said.
Comments suggested management did not view RXO’s current legal docket as a materially negative factor to C.H. Robinson’s overall stance related to its own claims exposure.
But the discussion came as investors were already considering the potential financial fallout of insurance claims, litigation and future coverage costs across the freight brokerage sector.
Insurance risk remains a concern for investors
The steep declines in shares of C.H. Robinson and Landstar demonstrate how insurance-related expenses can overshadow otherwise strong quarterly financial results.
C.H. Robinson is concerned about higher third-quarter claims expenses, higher SG&A guidance and the upcoming renewal of its 2027 insurance coverage. Management believes the company is in a good position to withstand inflationary pressures without affecting its earnings trajectory.
Meanwhile, Landstar has acknowledged that the severity of claims is rising, and that reserves for incurred but not reported claims are growing substantially. It has also noted that it is difficult to predict future liabilities in a more complex legal environment.
Both companies are under a microscope as investors re-assess the relationship between financial performance, insurance exposure and litigation risk.
The next important data point for C.H. Robinson will be the results of its 2027 insurance renewal talks, likely to be released mid- to late-December. Until more clarity is provided, insurance and claims costs are likely to remain the focus of the market’s evaluation of the financial outlook for the transportation sector.
