Landstar System Reports Fourth Quarter Revenue of $1.204B and Earnings Per Share of $1.62
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Insights
Landstar System, Inc.'s report of lower earnings per share (EPS) in Q4 2023 compared to the same period in the previous year, despite a shorter quarter, is indicative of operational challenges. The 22% decline in truckload volumes and a 10% decrease in truck revenue per load reflect a soft macro-freight environment and excess truck capacity. These factors are critical for investors as they suggest a contraction in demand for Landstar's services, which could be symptomatic of broader economic trends affecting the transportation sector. The company's strong balance sheet with significant cash reserves and operational cash flow is a positive sign, providing financial flexibility and resilience amidst market volatility.
Landstar's forward-looking statements regarding anticipated revenue and EPS for Q1 2024, with expected declines from the previous quarter, offer insight into the company's short-term expectations. The projected range of EPS, inclusive of estimated insurance and claims costs and the effective income tax rate, provides transparency for stakeholders to gauge potential financial performance. However, these projections should be weighed against the backdrop of ongoing industry challenges and economic conditions.
The transportation and logistics industry is highly sensitive to macroeconomic conditions and Landstar's performance reflects the impact of a weakening U.S. manufacturing sector. The company's reliance on independent business capacity owners (BCOs) and truck brokerage carriers, which accounted for 90% of their revenue, underscores the importance of understanding the dynamics of truckload transportation. The shift in revenue composition, with a decrease in truckload transportation via van and unsided/platform equipment, may point to changing market preferences or competitive pressures.
Additionally, Landstar's dividend declaration and share repurchase program signal confidence in its long-term financial health, potentially attracting income-focused investors. However, the overall decrease in gross profit and variable contribution margins year-over-year should be examined for their implications on operational efficiency and cost management strategies.
Landstar's report serves as a microcosm for the transportation sector's response to economic headwinds. The soft macro-freight environment, characterized by weak manufacturing output and a tepid peak season, suggests a broader economic slowdown that could affect consumer spending and business investment. The company's performance amidst these conditions, particularly the decline in load volumes and revenue per load, may be a leading indicator for economic analysts monitoring the health of the supply chain and logistics sectors.
The resilience of Landstar's network and its balance sheet strength, with a notable 27% trailing twelve-month return on average shareholders' equity and a 25% return on invested capital, provides a contrast to the operational challenges faced. This resilience may buffer the company against short-term market fluctuations while positioning it to capitalize on any upturn in freight market fundamentals.
JACKSONVILLE, Fla., Jan. 31, 2024 (GLOBE NEWSWIRE) -- Landstar System, Inc. (NASDAQ: LSTR) (“Landstar” or the “Company”) reported basic and diluted earnings per share (“EPS”) of
The Company’s fiscal year ends each year on the last Saturday in December. As such, the Company’s 2022 fourth quarter ended on December 31st and included fourteen weeks of operations, whereas the 2023 fourth quarter ended on December 30th and included thirteen weeks of operations. We estimate the extra week in 2022 contributed revenue of approximately
Gross profit in the 2023 fourth quarter was
Trailing twelve month return on average shareholders’ equity was
Truck transportation revenue hauled by independent business capacity owners (“BCOs”) and truck brokerage carriers in the 2023 fourth quarter was
“As expected, the soft macro-freight environment experienced throughout 2023 continued through the 2023 fourth quarter. The soft macro-freight environment, along with the additional operating week in the 2022 fourth quarter, made for challenging 2023 fourth quarter to 2022 fourth quarter comparisons,” said Landstar President and Chief Executive Officer Jim Gattoni. “The continuation of soft demand, driven by continued weakness in the U.S. manufacturing sector and a weaker than typical peak season, plus the continuation of a loose truck capacity market drove Landstar’s truck revenue per load and volumes in the 2023 fourth quarter below prior year levels. The number of loads hauled via truck declined
Gattoni continued, “Landstar’s financial performance in 2023, coming off back-to-back record setting years in 2022 and 2021 was admirable, considering the very difficult freight transportation backdrop. The Company’s performance during the downcycle in freight markets experienced in 2023 speaks to the strength and resiliency of the Landstar network and the power of our unique agent and capacity network. The Company’s balance sheet continues to be very strong, with cash and short term investments of approximately
Gattoni further commented, “Typically, revenue in the first quarter is expected to be lower than the revenue of the immediately preceding fourth quarter. Through the first several weeks of January, the number of loads hauled via truck and truck revenue per load have each trended reasonably in-line with historical, pre-pandemic end of fourth quarter to the beginning of first quarter sequential patterns. Assuming a continuation of these recent trends, I expect revenue per load on loads hauled via truck to be in a range of
Gattoni concluded, “Based on the range of revenue estimated for the 2024 first quarter, I would anticipate EPS to be in a range of
Landstar will provide a live webcast of its quarterly earnings conference call tomorrow morning at 8:00 a.m. ET. To access the webcast, visit the Company’s website at www.landstar.com; click on “Investor Relations” and “Webcasts,” then click on “Landstar’s Fourth Quarter 2023 Earnings Release Conference Call.”
About Landstar:
Landstar System, Inc., a Fortune 500 company, is a technology-enabled, asset-light provider of integrated transportation management solutions delivering safe, specialized transportation services to a broad range of customers utilizing a network of agents, third-party capacity providers and employees. Landstar transportation services companies are certified to ISO 9001:2015 quality management system standards and RC14001:2015 environmental, health, safety and security management system standards. Landstar System, Inc. is headquartered in Jacksonville, Florida. Its common stock trades on The NASDAQ Stock Market® under the symbol LSTR.
Non-GAAP Financial Measures:
In this earnings release and accompanying financial disclosures, the Company provides the following information that may be deemed a non-GAAP financial measure: variable contribution and variable contribution margin. The Company believes variable contribution and variable contribution margin are useful measures of the variable costs that we incur at a shipment-by-shipment level attributable to our transportation network of third-party capacity providers and independent agents in order to provide services to our customers. The Company also believes that it is appropriate to present each of the financial measures that may be deemed a non-GAAP financial measure, as referred to above, for the following reasons: (1) disclosure of these matters will allow investors to better understand the underlying trends in the Company’s financial condition and results of operations; (2) this information will facilitate comparisons by investors of the Company’s results as compared to the results of peer companies; and (3) management considers this financial information in its decision making.
Forward Looking Statements Disclaimer:
The following is a “safe harbor” statement under the Private Securities Litigation Reform Act of 1995. Statements contained in this press release that are not based on historical facts are “forward-looking statements”. This press release contains forward-looking statements, such as statements which relate to Landstar’s business objectives, plans, strategies and expectations. Terms such as “anticipates,” “believes,” “estimates,” “intention,” “expects,” “plans,” “predicts,” “may,” “should,” “could,” “will,” the negative thereof and similar expressions are intended to identify forward-looking statements. Such statements are by nature subject to uncertainties and risks, including but not limited to: the impact of the Russian conflict with Ukraine on the operations of certain independent commission sales agents, including the Company’s largest such agent by revenue in the 2023 fiscal year; an increase in the frequency or severity of accidents or other claims; unfavorable development of existing accident claims; dependence on third party insurance companies; dependence on independent commission sales agents; dependence on third party capacity providers; decreased demand for transportation services; U.S. trade relationships; substantial industry competition; disruptions or failures in the Company’s computer systems; cyber and other information security incidents; dependence on key vendors; potential changes in taxes; status of independent contractors; regulatory and legislative changes; regulations focused on diesel emissions and other air quality matters; intellectual property; and other operational, financial or legal risks or uncertainties detailed in Landstar’s Form 10-K for the 2022 fiscal year, described in Item 1A Risk Factors, Landstar’s Form 10-Q for the 2023 first and third fiscal quarters, described in Item 1A Risk Factors, and in other SEC filings from time to time. These risks and uncertainties could cause actual results or events to differ materially from historical results or those anticipated. Investors should not place undue reliance on such forward-looking statements, and the Company undertakes no obligation to publicly update or revise any forward-looking statements.
| Landstar System, Inc. and Subsidiary | ||||||||||||||||||
| Consolidated Statements of Income | ||||||||||||||||||
| (Dollars in thousands, except per share amounts) | ||||||||||||||||||
| (Unaudited) | ||||||||||||||||||
| Fiscal Years Ended | Fiscal Quarters Ended | |||||||||||||||||
| December 30, | December 31, | December 30, | December 31, | |||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||||
| Revenue | $ | 5,303,322 | $ | 7,436,562 | $ | 1,204,445 | $ | 1,674,767 | ||||||||||
| Investment income | 10,141 | 3,162 | 3,267 | 1,139 | ||||||||||||||
| Costs and expenses: | ||||||||||||||||||
| Purchased transportation | 4,068,262 | 5,804,017 | 927,028 | 1,291,676 | ||||||||||||||
| Commissions to agents | 462,668 | 614,865 | 99,271 | 149,106 | ||||||||||||||
| Other operating costs, net of gains on asset sales/dispositions | 54,191 | 45,192 | 13,193 | 10,314 | ||||||||||||||
| Insurance and claims | 114,241 | 125,835 | 27,270 | 29,570 | ||||||||||||||
| Selling, general and administrative | 211,799 | 221,279 | 52,728 | 56,080 | ||||||||||||||
| Depreciation and amortization | 58,153 | 57,453 | 13,655 | 14,826 | ||||||||||||||
| Total costs and expenses | 4,969,314 | 6,868,641 | 1,133,145 | 1,551,572 | ||||||||||||||
| Operating income | 344,149 | 571,083 | 74,567 | 124,334 | ||||||||||||||
| Interest and debt (income) expense | (3,946 | ) | 3,620 | (1,867 | ) | 345 | ||||||||||||
| Income before income taxes | 348,095 | 567,463 | 76,434 | 123,989 | ||||||||||||||
| Income taxes | 83,701 | 136,549 | 18,447 | 30,687 | ||||||||||||||
| Net income | $ | 264,394 | $ | 430,914 | $ | 57,987 | $ | 93,302 | ||||||||||
| Basic and diluted earnings per share | $ | 7.36 | $ | 11.76 | $ | 1.62 | $ | 2.60 | ||||||||||
| Average basic and diluted shares outstanding | 35,920,000 | 36,633,000 | 35,804,000 | 35,930,000 | ||||||||||||||
| Dividends per common share | $ | 3.26 | $ | 3.10 | $ | 2.33 | $ | 2.30 | ||||||||||
| Landstar System, Inc. and Subsidiary | |||||||||||||
| Consolidated Balance Sheets | |||||||||||||
| (Dollars in thousands, except per share amounts) | |||||||||||||
| (Unaudited) | |||||||||||||
| December 30, | December 31, | ||||||||||||
| 2023 | 2022 | ||||||||||||
| ASSETS | |||||||||||||
| Current assets: | |||||||||||||
| Cash and cash equivalents | $ | 481,043 | $ | 339,581 | |||||||||
| Short-term investments | 59,661 | 53,955 | |||||||||||
| Trade accounts receivable, less allowance | |||||||||||||
| of | 743,762 | 967,793 | |||||||||||
| Other receivables, including advances to independent | |||||||||||||
| contractors, less allowance of | 43,339 | 56,235 | |||||||||||
| Other current assets | 24,936 | 21,826 | |||||||||||
| Total current assets | 1,352,741 | 1,439,390 | |||||||||||
| Operating property, less accumulated depreciation | |||||||||||||
| and amortization of | 284,300 | 314,990 | |||||||||||
| Goodwill | 42,275 | 41,220 | |||||||||||
| Other assets | 122,530 | 136,279 | |||||||||||
| Total assets | $ | 1,801,846 | $ | 1,931,879 | |||||||||
| LIABILITIES AND SHAREHOLDERS' EQUITY | |||||||||||||
| Current liabilities: | |||||||||||||
| Cash overdraft | $ | 61,541 | $ | 92,953 | |||||||||
| Accounts payable | 395,980 | 527,372 | |||||||||||
| Current maturities of long-term debt | 27,876 | 36,175 | |||||||||||
| Insurance claims | 41,825 | 50,836 | |||||||||||
| Dividends payable | 71,433 | 71,854 | |||||||||||
| Other current liabilities | 76,569 | 98,945 | |||||||||||
| Total current liabilities | 675,224 | 878,135 | |||||||||||
| Long-term debt, excluding current maturities | 43,264 | 67,225 | |||||||||||
| Insurance claims | 58,922 | 58,268 | |||||||||||
| Deferred income taxes and other non-current liabilities | 40,513 | 41,030 | |||||||||||
| Shareholders' equity: | |||||||||||||
| Common stock, | |||||||||||||
| shares, issued 68,497,324 and 68,382,310 | 685 | 684 | |||||||||||
| Additional paid-in capital | 254,642 | 258,487 | |||||||||||
| Retained earnings | 2,783,645 | 2,635,960 | |||||||||||
| Cost of 32,780,651 and 32,455,300 shares of common | |||||||||||||
| stock in treasury | (2,048,184 | ) | (1,992,886 | ) | |||||||||
| Accumulated other comprehensive loss | (6,865 | ) | (15,024 | ) | |||||||||
| Total shareholders' equity | 983,923 | 887,221 | |||||||||||
| Total liabilities and shareholders' equity | $ | 1,801,846 | $ | 1,931,879 | |||||||||
| Landstar System, Inc. and Subsidiary | ||||||||||||||||||||
| Supplemental Information | ||||||||||||||||||||
| (Unaudited) | ||||||||||||||||||||
| Fiscal Years Ended | Fiscal Quarters Ended | |||||||||||||||||||
| December 30, | December 31, | December 30, | December 31, | |||||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||||||
| Revenue generated through (in thousands): | ||||||||||||||||||||
| Truck transportation | ||||||||||||||||||||
| Truckload: | ||||||||||||||||||||
| Van equipment | $ | 2,742,281 | $ | 3,892,085 | $ | 618,588 | $ | 869,788 | ||||||||||||
| Unsided/platform equipment | 1,490,393 | 1,760,357 | 339,910 | 423,401 | ||||||||||||||||
| Less-than-truckload | 117,683 | 142,438 | 26,913 | 36,444 | ||||||||||||||||
| Other truck transportation (1) | 479,173 | 835,959 | 99,702 | 203,958 | ||||||||||||||||
| Total truck transportation | 4,829,530 | 6,630,839 | 1,085,113 | 1,533,591 | ||||||||||||||||
| Rail intermodal | 98,297 | 145,017 | 24,344 | 31,255 | ||||||||||||||||
| Ocean and air cargo carriers | 266,638 | 558,986 | 64,280 | 83,830 | ||||||||||||||||
| Other (2) | 108,857 | 101,720 | 30,708 | 26,091 | ||||||||||||||||
| $ | 5,303,322 | $ | 7,436,562 | $ | 1,204,445 | $ | 1,674,767 | |||||||||||||
| Revenue on loads hauled via BCO Independent Contractors (3) | ||||||||||||||||||||
| included in total truck transportation | $ | 1,998,408 | $ | 2,636,036 | $ | 454,774 | $ | 592,264 | ||||||||||||
| Number of loads: | ||||||||||||||||||||
| Truck transportation | ||||||||||||||||||||
| Truckload: | ||||||||||||||||||||
| Van equipment | 1,259,578 | 1,496,247 | 292,711 | 365,984 | ||||||||||||||||
| Unsided/platform equipment | 504,765 | 558,530 | 115,294 | 138,094 | ||||||||||||||||
| Less-than-truckload | 175,650 | 191,233 | 41,070 | 48,493 | ||||||||||||||||
| Other truck transportation (1) | 201,407 | 320,790 | 44,295 | 77,449 | ||||||||||||||||
| Total truck transportation | 2,141,400 | 2,566,800 | 493,370 | 630,020 | ||||||||||||||||
| Rail intermodal | 29,620 | 40,710 | 7,470 | 8,770 | ||||||||||||||||
| Ocean and air cargo carriers | 32,820 | 41,850 | 7,440 | 7,440 | ||||||||||||||||
| 2,203,840 | 2,649,360 | 508,280 | 646,230 | |||||||||||||||||
| Loads hauled via BCO Independent Contractors (3) | ||||||||||||||||||||
| included in total truck transportation | 898,610 | 1,027,480 | 209,350 | 250,230 | ||||||||||||||||
| Revenue per load: | ||||||||||||||||||||
| Truck transportation | ||||||||||||||||||||
| Truckload: | ||||||||||||||||||||
| Van equipment | $ | 2,177 | $ | 2,601 | $ | 2,113 | $ | 2,377 | ||||||||||||
| Unsided/platform equipment | 2,953 | 3,152 | 2,948 | 3,066 | ||||||||||||||||
| Less-than-truckload | 670 | 745 | 655 | 752 | ||||||||||||||||
| Other truck transportation (1) | 2,379 | 2,606 | 2,251 | 2,633 | ||||||||||||||||
| Total truck transportation | 2,255 | 2,583 | 2,199 | 2,434 | ||||||||||||||||
| Rail intermodal | 3,319 | 3,562 | 3,259 | 3,564 | ||||||||||||||||
| Ocean and air cargo carriers | 8,124 | 13,357 | 8,640 | 11,267 | ||||||||||||||||
| Revenue per load on loads hauled via BCO Independent Contractors (3) | $ | 2,224 | $ | 2,566 | $ | 2,172 | $ | 2,367 | ||||||||||||
| Revenue by capacity type (as a % of total revenue): | ||||||||||||||||||||
| Truck capacity providers: | ||||||||||||||||||||
| BCO Independent Contractors (3) | 38 | % | 35 | % | 38 | % | 35 | % | ||||||||||||
| Truck Brokerage Carriers | 53 | % | 54 | % | 52 | % | 56 | % | ||||||||||||
| Rail intermodal | 2 | % | 2 | % | 2 | % | 2 | % | ||||||||||||
| Ocean and air cargo carriers | 5 | % | 8 | % | 5 | % | 5 | % | ||||||||||||
| Other | 2 | % | 1 | % | 3 | % | 2 | % | ||||||||||||
| December 30, | December 31, | |||||||||||||||||||
| 2023 | 2022 | |||||||||||||||||||
| Truck Capacity Providers | ||||||||||||||||||||
| BCO Independent Contractors (3) | 9,024 | 10,393 | ||||||||||||||||||
| Truck Brokerage Carriers: | ||||||||||||||||||||
| Approved and active (4) | 49,111 | 66,745 | ||||||||||||||||||
| Other approved | 27,524 | 30,999 | ||||||||||||||||||
| 76,635 | 97,744 | |||||||||||||||||||
| Total available truck capacity providers | 85,659 | 108,137 | ||||||||||||||||||
| Trucks provided by BCO Independent Contractors (3) | 9,809 | 11,281 | ||||||||||||||||||
(1) Includes power-only, expedited, straight truck, cargo van, and miscellaneous other truck transportation revenue generated by the transportation logistics segment. Power-only refers to shipments where the Company furnishes a power unit and an operator but not trailing equipment, which is typically provided by the shipper or consignee.
(2) Includes primarily reinsurance premium revenue generated by the insurance segment and intra-Mexico transportation services revenue generated by Landstar Metro.
(3) BCO Independent Contractors are independent contractors who provide truck capacity to the Company under exclusive lease arrangements.
(4) Active refers to Truck Brokerage Carriers who moved at least one load in the 180 days immediately preceding the fiscal quarter end.
| Landstar System, Inc. and Subsidiary | ||||||||||||||||||||
| Reconciliation of Gross Profit to Variable Contribution | ||||||||||||||||||||
| (Dollars in thousands) | ||||||||||||||||||||
| (Unaudited) | ||||||||||||||||||||
| Fiscal Years Ended | Fiscal Quarters Ended | |||||||||||||||||||
| December 30, | December 31, | December 30, | December 31, | |||||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||||||
| Revenue | $ | 5,303,322 | $ | 7,436,562 | $ | 1,204,445 | $ | 1,674,767 | ||||||||||||
| Costs of revenue: | ||||||||||||||||||||
| Purchased transportation | 4,068,262 | 5,804,017 | 927,028 | 1,291,676 | ||||||||||||||||
| Commissions to agents | 462,668 | 614,865 | 99,271 | 149,106 | ||||||||||||||||
| Variable costs of revenue | 4,530,930 | 6,418,882 | 1,026,299 | 1,440,782 | ||||||||||||||||
| Trailing equipment depreciation | 31,319 | 36,653 | 7,079 | 8,893 | ||||||||||||||||
| Information technology costs (1) | 25,486 | 19,834 | 5,695 | 5,966 | ||||||||||||||||
| Insurance-related costs (2) | 116,069 | 127,605 | 27,585 | 28,784 | ||||||||||||||||
| Other operating costs | 54,191 | 45,192 | 13,193 | 10,314 | ||||||||||||||||
| Other costs of revenue | 227,065 | 229,284 | 53,552 | 53,957 | ||||||||||||||||
| Total costs of revenue | 4,757,995 | 6,648,166 | 1,079,851 | 1,494,739 | ||||||||||||||||
| Gross profit | $ | 545,327 | $ | 788,396 | $ | 124,594 | $ | 180,028 | ||||||||||||
| Gross profit margin | 10.3 | % | 10.6 | % | 10.3 | % | 10.7 | % | ||||||||||||
| Plus: other costs of revenue | 227,065 | 229,284 | 53,552 | 53,957 | ||||||||||||||||
| Variable contribution | $ | 772,392 | $ | 1,017,680 | $ | 178,146 | $ | 233,985 | ||||||||||||
| Variable contribution margin | 14.6 | % | 13.7 | % | 14.8 | % | 14.0 | % | ||||||||||||
(1) Includes costs of revenue incurred related to internally developed software including ASC 350-40 amortization, implementation costs, hosting costs and other support costs utilized to support the Company’s independent commission sales agents, third party capacity providers, and customers, included as a portion of depreciation and amortization and of selling, general and administrative in the Company's Consolidated Statements of Income.
(2) Primarily includes (i) insurance premiums paid for commercial auto liability, general liability, cargo and other lines of coverage related to the transportation of freight; (ii) the related cost of claims incurred under those programs; and (iii) brokerage commissions and other fees incurred relating to the administration of insurance programs available to BCO Independent Contractors that are reinsured by the Company, which are included in selling, general and administrative in the Company’s Consolidated Statements of Income.
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