Landstar System (LSTR) Misses Q2 EPS by 7c, Revenues Beat; Offers 3Q EPS Guidance Above Consensus

Landstar System (NASDAQ: LSTR) reported Q2 EPS of $0.63, $0.07 worse than the analyst estimate of $0.70. Revenue for the quarter came in at $823.51 million versus the consensus estimate of $775.35 million.

“Overall, the resiliency of Landstar’s variable cost business model performed as expected given the unprecedented economic decline caused by the coronavirus (COVID-19) pandemic,” said Landstar’s President and Chief Executive Officer, Jim Gattoni. “We entered the 2020 second quarter knowing we would face a very soft freight demand environment as a result of actions taken by governmental authorities and businesses to reduce the spread of COVID-19. As anticipated, demand for freight services slowed significantly and capacity became readily available during the Company’s 2020 second quarter, especially in the spot market where the Company primarily operates. The number of loads and revenue per load on loads hauled via truck in the 2020 second quarter decreased 16 percent and 7 percent, respectively, from the 2019 second quarter. The number of loads hauled via truck was below the prior year comparable period by 21 percent, 21 percent and 9 percent for April, May and June, respectively. Revenue per load on loads hauled via truck was below the prior year comparable period by 6 percent, 9 percent and 6 percent in April, May and June, respectively.”

Gattoni further commented, “The 2020 second quarter presented operating conditions and challenges unlike any other quarter in Landstar’s history. Nevertheless, Landstar did not take any drastic cost reduction measures that could have disrupted our ability to service Landstar’s customers, agents, BCOs or other third party capacity providers or slow the progress on our technology initiatives. Also, as previously disclosed, Landstar instituted a pandemic relief incentive program as of the beginning of April for BCOs and agents. Under the program, Landstar paid an extra $50 to each of the BCO hauling the load and the Landstar agent dispatching the load for each load delivered by a BCO with a confirmed delivery date in April. The pandemic relief program was subsequently extended through the month of May. The Company’s 2020 second quarter results included a total of approximately $12.6 million of these pandemic relief incentive payments to BCOs and agents. Revenue decreased 21 percent and gross profit decreased 28 percent in the Company’s 2020 second quarter compared to the 2019 second quarter. Exclusive of the impact of the pandemic relief program, gross profit decreased 20 percent in the 2020 second quarter compared to the prior year period.”

Gattoni continued, “Although the ultimate impact that the coronavirus pandemic will have on the freight transportation industry continues to be unpredictable, we believe Landstar remains in a solid operational and financial position as we enter the third quarter. Through the first few weeks of July, the number of loads and revenue per load on loads hauled via truck have moved beyond the peak declines of April and May. Both the number of loads and revenue per load on loads hauled via truck in the first few weeks of July were below the corresponding period of 2019 in mid single-digit percentage ranges. Assuming current demand conditions persist, I expect the number of loads hauled via truck in the 2020 third quarter to be below the number of loads hauled by truck in the 2019 third quarter in a mid single-digit percentage range. My expectation is that pricing conditions for truck services in the 2020 third quarter will be slightly improved as compared to the 2020 second quarter with little change in the level of truck capacity available in the marketplace. Assuming those capacity market conditions continue throughout the rest of the third quarter, I expect 2020 third quarter truck revenue per load to be lower than the 2019 third quarter in a mid single-digit percentage range. Based on those expectations, I would anticipate revenue for the 2020 third quarter to be in a range of $885 million to $935 million. Assuming that range of estimated revenue and insurance and claims expense at 4.8 percent of BCO revenue (which reflects the significant increase in insurance premiums previously described), I would anticipate 2020 third quarter diluted earnings per share to be in a range of $1.11 to $1.17 per share.”

GUIDANCE:

Landstar System sees Q3 2020 EPS of $1.11-$1.17, versus the consensus of $0.98.

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

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