On Wednesday, Evercore ISI adjusted its outlook on Landstar System (NASDAQ:LSTR), reducing the price target to $160 from $165, while keeping an In-Line rating on the shares.
The transportation company's third-quarter earnings per share (EPS) of $1.41 missed both Evercore ISI's projection of $1.48 and the consensus estimate of $1.45. The shortfall was attributed to revenue per load in the main trucking segments not meeting the midpoint of the company's guidance, despite a slight outperformance in load numbers.
Landstar's costs have also been on the rise, with other operating costs and insurance expenses increasing as a percentage of revenue from the second quarter. The company's forecast for the fourth quarter is significantly below previous market expectations.
Landstar predicts truck loads to vary between a decrease of 4% and an increase of 1%, and truck revenue per load to grow 0-4% year over year. This translates to a projected revenue range of $1.15-1.25 billion, below the Street's average estimate of $1.24 billion, and an EPS guidance of $1.25-1.45, compared to the expected $1.57.
Landstar observed a 3.2% increase in revenue per load from the second to the third quarter of 2024, which outpaced the usual seasonal trend. However, the company experienced a strong start in July, a typical performance in August, and a dip in September, with the sluggishness extending into early October.
Despite some recovery post-hurricanes in the Southeast, management anticipates that neither November nor December will align with traditional seasonal patterns, as indicated by feedback from its broad and varied shipper base.
The analyst noted that with the declining count of business capacity owners (BCOs) and ongoing cost inflation, the company might face challenges in leveraging an eventual cyclical upturn. An anticipated $13 million headwind from incentive and stock-based compensation next year is expected to impact the company's financials.
Consequently, Evercore ISI has revised its fourth-quarter EPS estimate for Landstar to $1.39 from $1.61, with the full-year 2025 forecast decreasing to $6.41 from $6.86.
In other recent news, Landstar System Incorporated reported its Q2 2024 earnings, showing a mixed financial performance. Despite a challenging freight environment, the company emphasized its strong balance sheet and strategic growth areas like cross-border Mexico operations and heavy haul.
Although Landstar faced a decrease in revenue and gross profit margins compared to the same quarter in the previous year, it reported an improvement in its accident frequency index.
The company also increased dividends by 9% and repurchased shares worth $57 million in the first half of the year. However, bearish highlights included declines in loadings across various categories such as machinery, automotive equipment, and hazardous materials.
On a positive note, Landstar's accident frequency index improved by approximately 2% from the previous year and the company remains optimistic about long-term North American manufacturing. These are some of the recent developments that investors should take into account.
InvestingPro Insights
To complement the analysis provided by Evercore ISI, recent data from InvestingPro offers additional context for Landstar System's financial position. Despite the challenges outlined in the article, InvestingPro Tips highlight that Landstar has maintained dividend payments for 20 consecutive years and has raised its dividend for 4 consecutive years. This consistent dividend history suggests financial stability, even in the face of current headwinds.
The company's P/E ratio stands at 29.64, which is relatively high and aligns with the InvestingPro Tip indicating that Landstar is trading at a high Price / Book multiple of 6.4. This valuation may reflect investor confidence in the company's long-term prospects, despite the near-term challenges described in the article.
InvestingPro Data shows that Landstar's revenue for the last twelve months as of Q2 2024 was $4,903.19 million, with a revenue growth decline of 22.25% over the same period. This data corroborates the article's discussion of the company's recent performance and forward guidance falling below market expectations.
For investors seeking a more comprehensive analysis, InvestingPro offers 11 additional tips for Landstar System, providing a broader perspective on the company's financial health and market position.
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