Landstar System (LSTR) Tops Q3 EPS by 24c, Revenues Beat; Offers 4Q EPS/Revenue Guidance Above Consensus

Landstar System (NASDAQ: LSTR) reported Q3 EPS of $1.61, $0.24 better than the analyst estimate of $1.37. Revenue for the quarter came in at $1.09 billion versus the consensus estimate of $1.02 billion.

“Landstar entered the third quarter of 2020 facing one of the most unpredictable and challenging freight environments in the Company’s history,” said Landstar President and Chief Executive Officer Jim Gattoni. “In our second quarter earnings release dated July 22, 2020, we provided third quarter guidance anticipating a decrease in a mid single-digit range on a year-over-year basis for both truck volume and price. Through the first few weeks of fiscal July, the number of loads and revenue per load on loads hauled via truck were each below the corresponding period of 2019 in a mid single-digit percentage range. We closed fiscal July with truckload volumes and revenue per load on loads hauled via truck down only 1% and 2%, respectively, compared to fiscal July 2019. In the first week of the Company’s fiscal August period, the number of loads and revenue per load on loads hauled via truck both turned positive on a weekly basis compared to the corresponding week of 2019. Landstar continued to experience gradual improvement in the number of loads and revenue per load on loads hauled via truck on a sequential basis through August 2020. Moreover, on a year-over-year basis, the number of loads and revenue per load on loads hauled via truck in fiscal August 2020 in comparison to fiscal August 2019 increased by 2% and 5%, respectively.”

Gattoni continued, “In our second quarter earnings release, we provided third quarter revenue guidance of $885 million to $935 million and third quarter diluted earnings per share guidance of $1.11 to $1.17. On September 9, 2020, we disclosed in a Form 8-K filed with the SEC and further explained at a webcast investor conference the next day that based on overall market conditions, we expected 2020 third quarter revenue to be in a range of $1.02 billion to $1.06 billion and diluted earnings per share for the 2020 third quarter to be in a range of $1.40 to $1.46. Our updated guidance provided on September 9, 2020, reflected our expectation that the number of loads and revenue per load on loads hauled via truck for the 2020 third quarter would be above the 2019 third quarter in a low single-digit range. The number of loads and revenue per load on loads hauled via truck for fiscal September 2020 continued to improve from August 2020 on a sequential basis beyond our expectations, particularly with respect to the demand for services provided by van equipment, and exceeded fiscal September 2019 amounts by 7% and 10%, respectively. Overall, truck load volumes increased in the 2020 third quarter by 3% as compared to the 2019 third quarter, and truck revenue per load increased by 5% as compared to the 2019 third quarter. Ultimately, revenue in the 2020 third quarter was $1.086 billion and diluted earnings per share for the 2020 third quarter was $1.61. The achievement of both revenue and diluted earnings per share in excess of our updated guidance was primarily the result of the further sequential increases in the number of loads and revenue per load on loads hauled via truck from September 9th through the end of the fiscal month.”

Gattoni continued, “The Company’s variable cost business model, highly diversified customer base and geographically dispersed network of independent agents and third-party truck capacity provides resiliency and flexibility in any demand environment. While U.S. manufacturing production continued to lag prior year levels, the agent network capitalized on opportunities with new customers and executed by sourcing truck capacity for shippers experiencing rapid volume growth and/or supply chain disruption. During the 2020 third quarter, approved and active third-party truck carrier count increased approximately 10 percent compared to the 2020 second quarter to over 41,000 carriers. Additionally, the Company net added 272 trucks provided by BCOs in the third quarter.”

Gattoni further stated, “Through the first few weeks of October 2020, the number of loads hauled via truck was above the corresponding period of 2019 in a high single-digit percentage range. I expect that trend to continue during the remainder of the 2020 fourth quarter. Accordingly, I expect the number of loads hauled via truck in the 2020 fourth quarter to be above the number of loads hauled by truck in the 2019 fourth quarter in a high single-digit percentage range. Based on our current macroeconomic outlook, I expect pricing to remain strong and relatively stable through the 2020 fourth quarter given current demand and assuming little change in the level of truck capacity available in the marketplace. Assuming the current macroeconomic environment continues throughout the remainder of the fourth quarter, I expect 2020 fourth quarter truck revenue per load to be higher than the 2019 fourth quarter in a low double-digit percentage range. I anticipate revenue for the 2020 fourth quarter to be in a range of $1.150 billion to $1.200 billion.”

Earlier this month, the Company announced a new initiative relating to the reorganization of its regional field operations centers throughout the United States in support of its BCO network. It is the intent of the Company that this network of field operations centers will further support the Company’s continual efforts in recruiting and retaining the best truck owner-operators in our industry. In connection with this initiative, the Company expects to record a liability of approximately $15.0 million in its 2020 fourth quarter relating to anticipated buyouts of certain incentive commission arrangements with several of its independent sales agents due to the Company’s discontinuation of a BCO recruitment and retention program formerly involving those agents. This charge is expected to decrease 2020 fourth quarter diluted earnings per share by approximately $0.29. These incentive commission arrangements to agents to recruit and retain BCOs reduced gross profit by almost $10 million a year in recent years.

Gattoni concluded, “Assuming the estimated range of revenue for the 2020 fourth quarter described above, the anticipated charge for the expected buyouts of certain agent commission arrangements, and insurance and claims expense at 4.8 percent of BCO revenue, representing average insurance and claims costs as a percentage of BCO revenue over the past five years (adjusted to reflect the recent significant increase in insurance premiums covered in the Company’s second quarter earnings release), I would anticipate 2020 fourth quarter diluted earnings per share to be in a range of $1.32 to $1.42 per share. Excluding the one-time cost of $0.29 per diluted share related to the anticipated buyouts of the incentive commission arrangements, 2020 fourth quarter diluted earnings per share guidance would be $1.61 to $1.71.”

GUIDANCE:

Landstar System sees Q4 2020 EPS of $1.61-$1.71, versus the consensus of $1.45. Landstar System sees Q4 2020 revenue of $1.15-1.2 billion, versus the consensus of $1.06 billion.

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

You May Also Be Interested In

• Optimum Communications gets NYSE non-compliance notice over stock price
• Realty Income closes $1B convertible notes offering
• Silence Therapeutics closes $201M public offering of ADSs