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On Monday, Benchmark analysts reiterated their Hold rating on Landstar System (NASDAQ:LSTR) shares, while adjusting their earnings expectations ahead of the company’s upcoming first quarter earnings report. The transportation services company, currently valued at $5.04 billion, has seen its stock decline 17.37% year-to-date, according to InvestingPro data. The platform’s analysis suggests the stock is currently fairly valued based on its proprietary Fair Value model. The revised outlook follows Landstar’s recent guidance update on April 2nd, which was shared during the company’s annual agent convention and a subsequent analyst meeting.
Landstar, which operates as a transportation services company, provided an update to its first quarter guidance, indicating that earnings per share (EPS) are anticipated to be between $0.90 and $0.95, below the previously forecasted range of $1.05 to $1.25. InvestingPro data reveals that 9 analysts have revised their earnings downward for the upcoming period, while the company maintains strong fundamentals with more cash than debt on its balance sheet. Benchmark’s own EPS estimate was $1.13 before the adjustment. Despite the fact that revenue is expected to hit the mid-point of the $1.075-$1.175 billion guidance range, with Benchmark estimating $1.127 billion, increased insurance and claims costs are projected to weigh heavily on the company’s financials for the quarter.
These heightened costs are largely attributed to cargo theft and truck accident claims, which have been problematic for other truckload (TL) transportation companies as well. Additionally, the last fiscal week of Landstar’s first quarter revealed a significant supply chain fraud case, which is currently under investigation. This incident does not involve Landstar’s core North American Truckload business but could still negatively impact the first quarter EPS by an estimated $0.35 to $0.50 due to an impairment of a trade accounts receivable recorded on the December 28, 2024, balance sheet.
Landstar’s Truckload volume and revenue per load trends are consistent with the previously provided revenue guidance, and the company may see a seasonal increase in revenue from unsided/platform equipment, which constitutes 37% of its Truckload revenue. This uptick is partly due to a potential pull forward of heavy goods susceptible to tariffs. However, this boost could be temporary.
The investigation into the supply chain fraud is ongoing, and the financial impact mentioned does not account for any potential insurance or other recoveries that may offset the losses. As the situation develops, Landstar and its stakeholders will be closely monitoring the outcomes of the investigation and the overall impact on the company’s financial performance for the first quarter of 2025. Despite these challenges, InvestingPro data shows the company maintains a healthy financial position with a current ratio of 1.96 and has maintained dividend payments for 21 consecutive years. For deeper insights into Landstar’s financial health and extensive metrics, investors can access the comprehensive Pro Research Report, available exclusively to InvestingPro subscribers.
In other recent news, Landstar System has faced several significant developments that are crucial for investors to consider. The company reported its fourth-quarter 2024 earnings, revealing an earnings per share (EPS) of $1.31, which fell short of analysts’ expectations of $1.36, although revenue slightly exceeded forecasts at $1.21 billion. In light of these results, analysts from TD Cowen, Truist Securities, and Goldman Sachs have adjusted their price targets, with TD Cowen reducing it to $145 and Truist to $150, while Goldman Sachs maintained a target of $150 and a Sell rating. Landstar’s recent updates also included a revised earnings guidance for the first quarter of 2025, with an expected EPS between $0.90 and $0.95, down from an earlier forecast of $1.05 to $1.25, due to increased insurance and claims costs.
The company has been dealing with industry challenges, including a multi-year fraud issue impacting their financial outlook. Benchmark analysts noted that while the company’s revenue guidance for the first quarter remains within expectations, the EPS guidance reflects these ongoing issues. Truist Securities highlighted the potential impact of rising insurance costs on Landstar’s financial projections for 2025 and 2026, with updated EPS estimates of $5.40 and $6.85, respectively. Landstar’s strategic initiatives, including a focus on heavy haul services, have shown strong performance, but challenges in the truckload sector persist.
Despite these hurdles, Landstar remains committed to shareholder returns, repurchasing approximately 386,000 shares in the first quarter of 2025. Analysts continue to monitor the company’s situation, particularly the ongoing fraud investigation and its implications for future earnings. Investors are advised to keep a close eye on further updates from Landstar as it navigates these complex issues.
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