Landstar System (LSTR) Misses Q4 EPS by 3c, Revs Beat

Landstar System (NASDAQ: LSTR) reported Q4 EPS of $1.70, $0.03 worse than the analyst estimate of $1.73. Revenue for the quarter came in at $1.3 billion versus the consensus estimate of $1.2 billion.

“Landstar’s 2020 fourth quarter performance was outstanding,” said Landstar President and CEO Jim Gattoni. “Revenue, gross profit, and diluted earnings per share were each all-time quarterly records. Additionally, excluding the $15.5 million one-time cost to buyout certain incentive commission arrangements with several agents, operating income and operating margin in the 2020 fourth quarter would have achieved all-time quarterly records. Revenue from truck loads hauled via van equipment exceeded the 2019 fourth quarter by 44 percent and revenue from truck loads hauled via unsided/platform equipment exceeded the 2019 fourth quarter by 12 percent. Consumer demand for durables, building products and e-commerce drove record van quarterly revenue. For loads hauled via van equipment in the 2020 fourth quarter compared to the 2019 fourth quarter, the number of loads increased 16 percent and revenue per load increased 24 percent. Moreover, the fourth quarter was the only quarter of fiscal year 2020 in which revenue from truck loads hauled via unsided/platform equipment exceeded that of the corresponding prior year quarter. The number of loads and revenue per load on loads hauled via unsided/platform equipment in the 2020 fourth quarter exceeded the 2019 fourth quarter by 7 percent and 5 percent, respectively.”

Gattoni continued, “In our third quarter earnings release on October 21, 2020, we provided fourth quarter revenue guidance of $1.15 billion to $1.20 billion and fourth quarter diluted earnings per share guidance of $1.32 to $1.42. On November 17, 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 fourth quarter revenue and diluted earnings per share for the 2020 fourth quarter to be slightly above the high end of the previously issued guidance. The updated guidance provided on November 17, 2020 reflected truck load volume that at the time was trending near the high end of the previous guidance of high single digit percentage growth and revenue per load on loads hauled via truck trending above the 2019 fourth quarter in a mid-teen percentage range, as compared to the low double-digit percentage range reflected in our previously issued guidance. The year-over-year growth in the number of loads and revenue per load on loads hauled via truck in November and December continued to improve from October, with exceptional strength in substitute line haul services provided in support of e-commerce related demand during the holiday peak season. The number of loads hauled via truck in October, November and December exceeded the corresponding months of 2019 by 10 percent, 13 percent and 15 percent, respectively, while revenue per load on loads hauled via truck increased in October, November and December over the corresponding months of 2019 by 15 percent, 17 percent and 18 percent, respectively. Overall, truck load volume increased in the 2020 fourth quarter by 13% as compared to the 2019 fourth quarter, and truck revenue per load increased by 17% as compared to the 2019 fourth quarter. Ultimately, revenue in the 2020 fourth quarter was $1.296 billion and diluted earnings per share for the 2020 fourth quarter was $1.70.

Gattoni commented, “The achievement of revenue in excess of our guidance updated on November 17, 2020, primarily resulted from the continuing sequential increases Landstar experienced in the number of loads and revenue per load on loads hauled via truck from mid-November through the end of the fiscal year. Diluted earnings per share of $1.70 in the 2020 fourth quarter significantly exceeded the high end of our inital guidance of $1.42 due to the increase in revenue, actual insurance and claims costs that came in below the 4.8 percent of BCO revenue used in our previous guidance, and a lower effective income tax rate in the fourth quarter than initially anticipated.”

Gattoni further stated, “Landstar’s financial performance in 2020 was exceptional given the unprecedented impact of the COVID-19 pandemic on the U.S. economy and supply chains throughout the world, the softness in the U.S. manufacturing sector throughout the year, the transition of over 80 percent of the Company’s employees to work remotely beginning in March and the many other challenges experienced by Landstar customers, employees, agents, BCOs and other third party capacity providers in managing through the business and personal disruptions caused by the pandemic. The sudden closing of manufacturing facilities in the U.S. adversely impacted the financial results of Landstar’s 2020 second quarter with a decrease in diluted earnings per share of almost 60 percent compared to the 2019 second quarter. In light of the softness in U.S. manufacturing that continued beyond the 2020 second quarter, the Company’s financial performance in the back half of 2020 was remarkable. Revenue, gross profit, operating income and diluted earnings per share exceeded the back half of 2019 by 19 percent, 14 percent, 22 percent and 27 percent, respectively. Additionally, the Company ended the year with a record number of trucks provided by BCOs and a record number of approved third-party truck brokerage carriers. The resiliency of Landstar’s variable cost, light asset-based business model continues to shine.”

Gattoni continued, “January of any given year is typically the slowest month of the year. Through the first several weeks of January, the macroeconomic environment experienced throughout the back half of 2020 continued, characterized by strong consumer demand, relative softness in the U.S. industrial/manufacturing sector relative to sectors servicing consumers, and tight available truck capacity. I anticipate demand for substitute line haul services in the 2021 first quarter will return to the still very strong levels we experienced throughout September and October, before the steep spike in demand that took place during the holiday peak season. I expect these market conditions throughout the remainder of the 2021 first quarter and, as a result, revenue and diluted earnings per share in the 2021 first quarter to be well above that of the 2020 first quarter. From a revenue standpoint, I expect the number of loads hauled via truck in the 2021 first quarter to exceed the 2020 first quarter in a high single-digit percentage range. I expect revenue per load on loads hauled via truck in the 2021 first quarter to exceed the 2020 first quarter in a mid-teen percentage range. As such, I anticipate revenue for the 2021 first quarter to be in a range of $1.10 billion to $1.15 billion.”

Gattoni concluded, “Based on the range of revenue estimated for the 2021 first quarter, I would anticipate diluted earnings per share to be in a range of $1.55 to $1.65. This range of diluted earnings per share includes insurance and claims expense estimated at 4.6 percent of BCO revenue.”

GUIDANCE:

Landstar System sees Q1 2021 EPS of $1.55-$1.65, versus the consensus of $1.45.

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

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