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Landstar (LSTR) Down 3.6% Since Last Earnings Report: Can It Rebound?

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It has been about a month since the last earnings report for Landstar System (LSTR - Free Report) . Shares have lost about 3.6% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Landstar due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

Earnings Miss at Landstar in Q3

Landstar's earnings of $1.35 per share missed the Zacks Consensus Estimate by 9 cents. Moreover, the bottom line declined 17.2% on a year-over-year basis despite lower costs.  

Revenues of $1,011.7 million too fell short of the Zacks Consensus Estimate of $1,025.5 million. The top line also decreased 15.8% year over year. Lower truck volumes and the resultant decline in truck revenues, mainly due to unfavorable market conditions, hampered results. Management on the conference call stated that the rate paid to truck brokerage carriers in the third quarter was 116 basis points, lower than the year-ago figure.

Gross profit (revenues excluding the cost of purchased transportation and commissions to agents) came in at $152.6 million in the reported quarter, down 10.9% year over year. Further, operating margin (operating income divided by gross profit) dipped to 46.3% from 50.8% in the prior year. Total costs and expenses (on a reported basis) declined to $942.3 million from $1.12 billion a year earlier.

Total revenues in the truck transportation segment — accounting for bulk (92.1%) of the top line — were $932.1 million, down 16.6%. Rail intermodal revenues of $28.97 million also fell 15.8%. Plus, ocean and air cargo carriers generated revenues of $30.36 million that slipped year over year. Meanwhile, other revenues augmented 11.1% to $20.1 million.

Truckload transportation revenue hauled via van equipment in the reported quarter declined 19.8% to $575 million. Also, truckload transportation revenue hauled via unsided/platform equipment decreased 13.3% to $331.8 million. Moreover, revenue hauled by rail, air and ocean cargo carriers was $59.3 million in the third quarter, down 9.7% year over year. The overall third-quarter truck revenue per load too dropped 12.7% on a year-over-year basis.

Liquidity

At the end of the third quarter, the company’s cash and cash equivalents were $284.43 million compared with $199.74 million at the end of December 2018. Additionally, long-term debt (excluding current maturities) totaled $61.39 million compared with $84.86 million at the end of last December.

Q4 Outlook

The company expects truck revenue per load in the December quarter to fall in a high single-digit percentage range compared with the figure recorded in fourth-quarter 2018. Revenues in the ongoing quarter  are expected between $970 million and $1.02 billion. Management expects current-quarter earnings per share in the $1.40-$1.46 range.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in estimates revision.

VGM Scores

At this time, Landstar has a nice Growth Score of B, a grade with the same score on the momentum front. Following the exact same course, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Landstar has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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