A month has gone by since the last earnings report for Landstar System (LSTR). Shares have lost about 10% 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 drivers.
Earnings Beat at Landstar in Q1
Landstar reported mixed results in the first quarter of 2019. The company’s earnings came in at $1.58 per share, surpassing the Zacks Consensus Estimate of $1.52. Moreover, the bottom line rose 15.3% year over year.
Revenues totaled $1,033 million, falling below the Zacks Consensus Estimate of $1,050.9 million. Also, the top line slipped 1.4% year over year, primarily due to soft truck pricing.
Gross profit (revenues excluding the cost of purchased transportation and commissions to agents) of $155.6 million increased slightly from the year-ago quarter. Additionally, operating income rose 7.6% to $80.9 million. Meanwhile, total operating expenses decreased 2.1% to $953.24 million in the quarter under review.
Total revenues in the truck transportation segment — accounting for bulk (92.3%) of the top line — were $953.11 million, down 2.7%. Rail intermodal revenues were $30.02 million, up 2.5%. Meanwhile Ocean and air cargo carriers generated revenues of $30.67 million, up 30.6%. Other revenues augmented 19.5% to $19.21 million.
Total number of loads hauled by trucks inched up 2% year over year to 502. 3 million, courtesy of a 1% volume expansion through van equipment and a 6% and 4% rise in less-than-truckload volumes and unsided/platform equipment volumes, respectively. While loads hauled via railroads declined 6.2%, the same on ocean and air cargo carriers climbed 18.6%.
Liquidity and Buyback
At the end of the first quarter, the company’s cash and cash equivalents were $264.63 million compared with $199.74 million at the end of December 2018. Additionally, long-term debt (excluding current maturities) totaled $75.25 million in the period compared with $84.86 million at the end of last December.
During the first quarter, Landstar bought back 124,481 shares for $13 million. Under the current buyback program, the company is authorized to purchase approximately 1.9 million shares.
Landstar’s board cleared a quarterly cash dividend of 16.5 cents per share, payable May 31, 2019 to shareholders of record as of May 9.
Total number of loads hauled via truck in the second quarter of 2019 is expected to be commensurate with that in second-quarter 2018. With truck prices expected to remain under pressure due to increase in truck capacity, the company anticipates second-quarter truck revenue per load to be in high single-digit percentage range, lower than that achieved in the second quarter of 2018. Revenues in the quarter are projected to be between $1.075 billion and $1.125 billion. Additionally, earnings in the quarter are estimated in the range of $1.56-$1.62 per share compared with $1.51 a year ago.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates.
Currently, Landstar has a strong Growth Score of A, though it is lagging a bit on the Momentum Score front with a B. 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.
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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