Landstar (LSTR) Q2 Earnings Miss On Soft Freight Demand

Landstar System, Inc.’s (NASDAQ:LSTR) earnings of $1.53 per share in second-quarter 2019 missed the Zacks Consensus Estimate of $1.54. Lower truck volumes and the resultant decline in truck revenues hampered results. However, the bottom line inched up 1.3% year over year on reduced costs.

Revenues of $1,045 million fell shy of the Zacks Consensus Estimate of $1,078 million. The top line also decreased 11.6% year over year, primarily due to soft truck pricing on account of weak freight demand.

Gross profit (revenues excluding the cost of purchased transportation and commissions to agents) came in at $158 million in the reported quarter compared with $171.4 million in the second quarter of 2018. Further, operating income dipped 3.1% to $80.85 million. However, total operating expenses decreased 12.2% to $965.47 million in the quarter under review.

Segmental Results

Total revenues in the truck transportation segment — accounting for bulk (92.6%) of the top line — were $968.2 million, down 12.4%. Rail intermodal revenues were $28.57 million, down 11.5%. Meanwhile, ocean and air cargo carriers generated revenues of $28.22 million, up marginally year over year. Other revenues augmented 17.3% to $20.04 million.

Total number of loads hauled by trucks slipped 1% year over year due to 3% decrease in the number of loads hauled via van equipment. Moreover, the number of loads hauled via railroads, ocean cargo carriers and air cargo carriers declined 8%.

Liquidity and Buyback

At the end of the second quarter, this Zacks Rank #3 (Hold) company’s cash and cash equivalents were $250.21 million compared with $199.74 million at the end of December 2018. Additionally, long-term debt (excluding current maturities) totaled $65.57 million in the period compared with $84.86 million at the end of last December. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

During the second quarter, Landstar bought back approximately 550,000 shares for $56.8 million. Under the current buyback program, the company is authorized to purchase approximately 1.33 million shares.

Dividend Hike

Landstar’s board has announced a dividend hike of 12% to 18.5 cents per share (74 cents annually). The amount is payable Aug 30, 2019 to shareholders of record as of Aug 12.

Q3 Outlook Bleak

With continued sluggishness in freight demand continuing, total number of loads hauled via truck in the third quarter are expected to decline in low single-digit percentage range compared with that achieved in the year-ago period. The subdued truck pricing witnessed in the second quarter is anticipated to continue through the third quarter. As a result, truck revenue per load will slid in low double-digit percentage range year over year in the current quarter. Revenues for the period are predicted in the range of $1.01-$1.06 billion. The Zacks Consensus Estimate for the same stands at $1.1 billion, above the mid-point ($1 billion) of the guided range. Meanwhile, earnings are estimated in the $1.48-$1.54 per share band. The mid-point ($1.51) of the guided range falls short of the Zacks Consensus Estimate of $1.56.

Upcoming Releases

Investors interested in the broader Transportation sector are keenly awaiting second-quarter earnings reports from key players like Expeditors International of Washington, Inc. (NASDAQ:EXPD) , Air Lease Corporation (NYSE:AL) and Hertz Global Holdings, Inc (NYSE:HTZ) . While Expeditors and Hertz will report quarterly earnings numbers on Aug 6, Air Lease will announce the same on Aug 8.

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