Avondale Downgrades Landstar Following Q1 Results

Landstar System, Inc. LSTR reported its 1Q16 results with a decline in revenue from the 2015 levels.

Avondale Partners’ Donald Broughton downgraded the rating on the company from Market Outperform to Market Perform, while lowering the price target from $72.50 to $67.50.

“While we still have admiration for LSTR's entrepreneurial culture, variable cost model, and financially savvy management team, our outlook for the stock in the short to intermediate term is muted,” Broughton explained.

1Q

Landstar System reported its EPS for the quarter above the consensus but marginally below the estimate. Total revenue declined 6.6 percent, while operating margin came in at 42.7 percent.

Record Loads

“The number of loads hauled via truck was higher than any first quarter in Landstar history,” the analyst mentioned.

The number of loads hauled via truck increased 3 percent year on year in 1Q16, with a 22 percent increase in the number of loads hauled via railroad, air cargo and ocean cargo carriers.

2Q Guidance

According to the Avondale report, “The company expects the number of loads hauled via truck in the 2016 second quarter to increase in a low single digit range over the 2015 second quarter.”

Landstar System also expects truck revenue per load for 2Q16 to be below the 2Q15 levels, with revenue for 2Q16 guided to a range of $770-$820 million and EPS below the 2Q15 levels.

The EPS estimates for FY16 and FY17 have been lowered from $3.50 to $3.20 and from $3.85 to $3.50, respectively.