Benchmark holds Landstar rating, cites soft margins and outlook

On Friday, Benchmark analysts maintained a Hold rating on Landstar System (NASDAQ:LSTR) stock, without setting a new price target. In their latest assessment following Landstar’s fourth-quarter earnings report, they noted revenue growth but highlighted concerns over soft margins and a first-quarter outlook that fell short of expectations. According to InvestingPro data, the stock is currently trading near its 52-week low of $163.18, with a P/E ratio of 30.37x, suggesting relatively high valuation multiples despite recent market pressure.

Landstar reported fourth-quarter 2024 earnings per share (EPS) of $1.31, which matched Benchmark’s estimate and fell within the company’s guidance range of $1.25 to $1.45. Although revenue saw a slight year-over-year increase to $1.209 billion, it was the first rise in two years and only marginally met analysts’ projections. The variable contribution margin came in at 13.8%, slightly below the expected 14%, despite a small reduction in operating expenses. InvestingPro analysis reveals strong financial health indicators, with the company maintaining more cash than debt and a healthy current ratio of 1.96x, suggesting robust liquidity management.

The transportation company’s Business Capacity Owner (BCO) count continued to drop, and operating income as a percentage of net revenue has decreased to levels last seen in 2009/2010. With high truckload (TL) capacity and subdued demand, the load growth of -3.4% was at the lower end of the forecasted -4% to +1% range. However, revenue per truckload increased by 3.1% compared to the previous year, fitting within the upper half of the projected 0% to +4% range.

Sequentially, truck revenue per load in the fourth quarter rose by 1% compared to the third quarter, aligning with the typical pre-pandemic seasonality. Despite this, Landstar’s guidance for the first quarter of 2025 regarding revenue and EPS again did not meet the estimates set by Benchmark and FactSet, although truck volumes and revenue per load are considered to be within normal seasonal patterns.

Benchmark analysts concluded that while Landstar’s valuation is on the higher end of its historical range, it reflects the company’s high-quality business and strong balance sheet. Nevertheless, they expressed caution due to the current freight demand environment, which is characterized by excess capacity. InvestingPro data highlights the company’s impressive 21-year streak of consistent dividend payments, with a current dividend yield of 2.06%. For deeper insights into Landstar’s valuation and financial health metrics, investors can access the comprehensive Pro Research Report, which provides detailed analysis of over 1,400 US stocks.

In other recent news, Landstar System reported its fourth-quarter earnings and revenue results, which presented a mixed picture. The transportation firm posted earnings per share of $1.31, falling short of the consensus estimate of $1.36. However, the company’s revenue stood at $1.21 billion, marginally exceeding analyst projections of $1.2 billion. These results reflect a slight year-over-year increase of 0.4% in Landstar’s fourth-quarter revenue, while truck transportation revenue saw a minor decline.

In terms of analyst insights, Benchmark analyst Christopher Kuhn maintained a Hold rating on Landstar, noting that the company’s results were consistent with estimates. Despite the revenue meeting expectations, the company’s variable contribution margin and Business Capacity Owners count were slightly below anticipated levels.

On another note, Landstar’s board declared a quarterly dividend of $0.36 per share, highlighting the company’s commitment to returning value to shareholders. These recent developments provide a snapshot of Landstar’s financial performance and market position.

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