Despite high operating expenses, shares of Landstar System, Inc. (LSTR - Free Report) have fared well in a year’s time. The stock has gained 6.9%, against the industry’s decline of 3.3%.
Reasons for Impressive Price Performance
The Jacksonville, FL-based company has an impressive surprise history. It beat estimates in three out of the trailing four quarters, the average being 1.8%.
Landstar is being aided by higher demand for services on the back of upbeat freight scenario. Strong freight demand and a buoyant economy are also expected to boost results in the final quarter of 2018. The company expects fourth-quarter 2018 revenues in the range of $1.18 billion-$1.23 billion, reflecting an increase of 12-17% from the prior-year quarter’s tally. The Zacks Consensus Estimate for current-quarter revenues is pegged at $1.22 billion. Further, earnings per share (EPS) are expected between $1.56 and $1.62 for the fourth quarter, reflecting a rise from $1.54 in the year-ago quarter. The Zacks Consensus Estimate for earnings is pegged at $1.58.
Moreover, the company’s asset-light business model distinguishes it from other players in the industry. In an industry that is mostly capital intensive in nature with heavy fixed costs, Landstar operates with low-fixed costs. The company utilizes a network of independent sales agents and third-party truck capacity providers to offer services. Thus, it is spared of the lump sum fixed costs of owning the heavy trucking equipment. This enables the company to generate higher return on investments.
Further, Landstar’s efforts to reward shareholders in the form of dividends and share buybacks also impress us. The company has hiked dividend twice so far this year. In January, it raised dividend by 50% to 15 cents per share. The same was further increased to 16.5 cents in July, up by 10%. Regarding buyback, the company currently has 2 million shares to be bought back under the existing share repurchase program.
Additionally, Landstar flaunts an impressive VGM Score of A. Here V stands for Value, G for Growth and M for Momentum and the score is a weighted combination of all three scores. Also, the company's trailing 12-month return on equity (ROE) underlines growth potential. The company’s ROE of 33.8% compares favorably with the industry’s 12.6%, reflecting efficiency in using shareholders’ funds.
Zacks Rank & Key Picks
Landstar carries a Zacks Rank #3 (Hold). A few better-ranked stocks in the Zacks Transportation sector are Norfolk Southern Corporation (NSC - Free Report) , Frontline Ltd. (FRO - Free Report) and Spirit Airlines, Inc. (SAVE - Free Report) . While Norfolk Southern carries a Zacks Rank #2 (Buy), Frontline and Spirit Airlines sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Shares of Norfolk Southern, Frontline and Spirit Airlines have gained 7.2%, 33.8% and 34% in the past six months, respectively.
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