Landstar System (LSTR) Tops Q4 EPS by 9c, Revenues Miss; Q1 EPS Guidance Above Consensus, Q1 Revenue Guidance Below Consensus

Landstar System (NASDAQ: LSTR) reported Q4 EPS of $1.68, $0.09 better than the analyst estimate of $1.59. Revenue for the quarter came in at $1.18 billion versus the consensus estimate of $1.21 billion.

“I am very pleased with Landstar’s financial performance during the 2018 fourth quarter,” said Landstar’s President and Chief Executive Officer Jim Gattoni. “The 2018 fourth quarter established fourth quarter records for revenue, gross profit and operating income, while diluted earnings per share was an all-time quarterly record. The Company also set a new all-time Landstar record for trucks provided by BCOs with 10,599 as of the end of the quarter.”

Gattoni continued, “Demand for our services continued to be strong in the 2018 fourth quarter. The number of loads hauled via truck was a fourth quarter record and increased 4 percent over a very robust 2017 fourth quarter, driven by a 4 percent increase in the number of loads hauled via van equipment, a 3 percent increase in the number of loads hauled via unsided/platform equipment and a 13 percent increase in less-than-truckload volume. The deceleration in the year-over-year percentage growth rate in truck volumes for the 2018 fourth quarter compared to that experienced in the first three quarters of 2018 was mostly due to seasonal softness in the fourth quarter of 2018, as sequential growth was below recent historical trends.”

Gattoni further commented, “As expected, the pricing environment for our truckload services continued to be strong during the 2018 fourth quarter. Similar to truck volumes, however, we experienced a decelerating percentage growth rate in revenue per load on a year-over-year basis compared to the growth rates experienced in the first three quarters of 2018. The price deceleration was due to a much tougher year-over-year comparison applicable to the 2018 fourth quarter and seasonal softness that began at the end of the 2018 third quarter. Revenue per load on loads hauled via van equipment increased 7 percent over the 2017 fourth quarter and revenue per load on loads hauled via unsided/platform equipment increased 9 percent over the 2017 fourth quarter. As a result, revenue per load on loads hauled via truck was 7 percent higher than the 2017 fourth quarter.”

Gattoni continued, “Landstar’s financial performance in fiscal year 2018 was by far the best in the Company’s history. Landstar set many annual financial and operational high water marks in 2018, including revenue, gross profit, operating income, net income, diluted earnings per share, truck loads and year end truck count provided by BCOs. Revenue in fiscal 2018 was approximately $4.6 billion, an annual record, and was approximately $969 million higher than the previous record set in 2017. Gross profit in 2018 was $667 million, also an annual record. Record revenue and gross profit in 2018 was provided on the strength of approximately 2,060,000 loads hauled via truck capacity, the highest number of loads hauled via truck in any year in Landstar history. Operating income in 2018 was an annual record of $332 million and represented year-over-year growth of 36 percent. Diluted earnings per share in 2018 was an annual record of $6.18. These 2018 achievements speak to the strength and depth of the Landstar network and our ability to execute. I am extremely pleased by our continued organic load volume growth and our ability to attract productive agents and capacity to the network.”

Gattoni further commented, “With respect to near term performance, during the first four weeks of 2019, year-over-year growth in the number of loads hauled via truck is trending slightly higher than the comparable period of 2018. As such, I expect loads hauled via truck in the 2019 first quarter to grow in a low single-digit percentage range over the 2018 first quarter. As it pertains to revenue per load on loads hauled via truck, the 2018 first quarter was one of very few first quarters in Landstar history that experienced an increase in truck revenue per load from the preceding fourth quarter. In the four years prior to 2018, truck revenue per load decreased seasonally on average 7 percent from the fourth quarter to the immediately following first quarter. We expect a more normal seasonal trend in the 2019 first quarter as rates appear to have stabilized through the first four weeks of January. As such, I expect revenue per load on loads hauled via truck in the 2019 first quarter to decrease in a low single-digit percentage range from the 2018 first quarter. Assuming the current environment continues throughout the 2019 first quarter, I anticipate revenue for the 2019 first quarter to be in a range of $1.025 billion to $1.075 billion. Assuming that range of estimated revenue, I would anticipate 2019 first quarter diluted earnings per share to be in a range of $1.51 to $1.57 per share. This estimated range of diluted earnings per share assumes insurance and claims costs at 3.6 percent of BCO revenue, representing the historical annual average of insurance and claims costs to BCO revenue over the preceding five years, and an effective income tax rate of approximately 21.1 percent, which represents the Company’s annual estimated effective income tax rate of 24.2 percent, net of a discrete item related to equity compensation specific to the 2019 first quarter.”

GUIDANCE:

Landstar System sees Q1 2019 EPS of $1.51-$1.57, versus the consensus of $1.42. Landstar System sees Q1 2019 revenue of $1.025-1.075 billion, versus the consensus of $1.1 billion.

For earnings history and earnings-related data on Landstar System (LSTR) click here.

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