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Landstar System Inc (LSTR)

We all know UPS loves logistics.  Like UPS,  Landstar is a supply chain, logistics and transportation expert for all sorts of commercial needs.  In contrast to UPS, Landstar integrates a vast network of third party freight movers and systems to get parcels from point A to point B quicker, smarter and hopefully cheaper than their competitors.

For growing companies that need to move more of their goods around the world, LSTR provides solutions to execute their customers’ logistical needs via air, rail, road and sea.  They can ship, store, track, economize and manage the entire supply chain from beginning to end.

In a world that wants instant gratification, quick delivery and full automation.  Shipping companies like LSTR may have a very bright future. Their stock is up 44% since October and could regain momentum here if their positive earnings trajectory continues.  

Company Description & Developments
Landstar is a transportation and logistics company that provides solutions from individual shipments all the way up to managing completely enterprise shipping and logistical needs.  The bulk of their business is focused in the United States, Canada and Mexico with a moderate amount of global exposure.  They also offer insurance thorough Signature Insurance Company, a wholly owned offshore insurance subsidiary, as well as Risk Management Claim Services, Inc.

According to the Cass Freight Index, shipments have not been that strong over the past couple months, but LSTR still managed to report strong results back on January 31st.  Below is an expert from the report.  

-Year over year, total freight expenditures were up 22.1%, but that comparison was misleading. Thanks to bad weather last year, January 2011 was the lowest point the Index reached in the past 18 months.  Freight expenditures have leveled off in recent months as the reduced shipment volume took pressure off capacity and rates stabilized, note Cass analysts. Total freight spend has been relatively flat during the last several months, mirroring shipment volume, indicating that the rate increases that were prevalent for most of 2011 have slowed, too.

The thinking here is that LSTR was able to deliver strong results even in a tough economic climate that is supposedly improving.  If you look at peers like UPS, you will find indications that shipping demand is on the rise and this should translate into profits for Landstar.  Keep in mind that UPS was seeing most strength in small packages and has more of a global reach.   Fedex also saw increasing volume as well in the last quarter as did several of Landstar’s competitors.

Financial Profile
Landstar is a smaller mid-cap (2.56 billion) company that is trading at about 20 times trailing earnings (P/E).  Looking forward, Zacks Consensus Estimates are calling for that number to drop closer to 18 with no change in price over the next year.  Landstar became a Zacks Rank 1 strong buy on February 4th.  

The shipping company reported a quarterly sales increase of 5% at their last earnings report.  Annual sales were up 22% compared to Q42010 with total sales of roughly 183.25 million in FY2011.  LSTR earnings jumped from $1.77 in FY2010 to $2.39 for FY2011.  Landstar is expected to earn $2.76 in FY2012 according to the Zacks Consensus Estimate. 

Earnings Estimates
Since LSTR reported earnings and offered guidance, we saw the majority of analysts raise estimates higher for the coming quarters as well as FY2012 and FY2013 in the past month.  Landstar will report Q22012 results on April 19th.

Expectations are for Landstar to generate $0.54 in income this quarter.  Of the 17 analysts who cover LSTR, the consensus is for the company to grow earnings by 16% in the current year (FY2012) and roughly 13.5% in FY2013. 

In terms of the magnitude of analyst estimate trends, we are seeing all of the consensus estimates higher than they were 90 days ago for the current and next quarters as well as FY2012 and FY2013. 

Landstar beat estimates last quarter by 60% and has managed to beat estimates for the past year by an average of over 4%.

Market Performance & Technicals
Since the market lows of October 2011, Landstar has been a stable momentum stock, seeing its shares rise over 44% to a new 52 week high $53.00 less than a week ago.  For most of that move, LSTR has been above its 50 day moving average, which can be used as clear support for the stock.  That average currently stands at $48.74.  The 200 day moving average sits below it at $44.99.

There seems to be a bit of consolidation around the $52 level as markets digest new economic and earnings data.  Barring any major surprises, this consolidation could provide a support foundation for the next leg higher in LSTR.

Even while the stock moves sideways, the trend remains bullish and the momentum is intact.  Watch for any weakness in consumer or retail spending data, which would most likely impact LSTR in a big way (positive or negative).  LSTR has exceeded the S&P 500’s performance by over 15% in the past year and just about 2.5% in the past 3 months.  With a Beta of .85, it’s a momentum stock that might be a little more manageable when it comes to volatility. 

Jared A Levy is the Momentum Stock Strategist for Zacks.com. He is also the Editor in charge of the market-beating Zacks Whisper Trader Service.

 

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