Landstar System (NASDAQ:LSTR) Stock, Quote.Headers.trade-ideas

Landstar System

Landstar System is an agent based asset-light third-party logistics provider focused on domestic truck brokerage (90% of revenue). Historically, around half of its truck transportation freight is hauled by leased owner-operators with the remainder hauled by third-party broker-carriers. To a smaller degree, it offers intermodal, global air and ocean forwarding, and warehousing services. Landstar also runs a small business that offers insurance programs to captive owner-operators. It has a long history of industry-leading execution and operating profitability.

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Landstar System (NASDAQ: LSTR) is benefiting from its robust financial stability and strong liquidity. The shareholder-friendly approach also bodes well for the company. However, the company is grappling with the freight market downturn.

Here&#39;s Why Investors Should Hold on to Landstar Stock Now

SNDR

INDIANAPOLIS — The Scopelitis Transportation Law Seminar is a three-day parade of speakers and panels discussing everything from what states&#39; license plates fleets should seek to slap on their trucks to the treatment of owner-operators whose trucks leave the road for maintenance.

Scopelitis Seminar Delves Into Lease Purchase Deals, M&amp;A, ESG and More

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With Quiver Quantitative’s recent institutional holdings data, we can see that many hedge funds and asset managers have been increasing their holdings in Landstar System Inc. (NASDAQ: LSTR).

The Bull Case For Landstar System Inc.

Landstar System Inc

Landstar System (NASDAQ: <a class="ticker" href="https://www.benzinga.com/stock/lstr#NASDAQ">LSTR</a>) is benefiting from its robust financial stability and strong liquidity. The shareholder-friendly approach also bodes well for the company. However, the company is grappling with the freight market downturn.
<h2>Factors Favoring LSTR</h2>
Landstar&#39;s commitment to shareholder value is commendable, as the company consistently returns significant capital to its investors through stock repurchase programs and dividends. In the first half of 2024, Landstar repurchased shares of its common stock for a total of $57 million and paid $95 million in dividends. Moreover, in August 2024, LSTR paid a quarterly dividend of $0.36 per share to its stockholders. This quarterly dividend includes a 9% increase to its regular quarterly dividend.
Despite the softness prevailing in the freight environment, the company demonstrates strong financial stability and cash-generating capabilities. By the end of the second quarter of 2024, LSTR reported cash and short-term investments totaling $504 million. For the first half of 2024, cash flow from operations reached $142 million, while cash capital expenditures amounted to $17 million.
The company exited the second quarter of&nbsp;2024 with a current ratio (a&nbsp;measure of liquidity) of 2.17. A current ratio of greater than 1 is always desirable as it indicates that the company has enough cash to meet its short-term obligations.
Shares of LSTR have rallied 4.3% over the past year compared to the&nbsp;industry&#39;s decline of 4.9% in the same period.
<img alt="Zacks Investment Research" src="https://staticx-tuner.zacks.com/images/articles/charts/2f/80936.jpg?v=1698351877" />
Image Source: Zacks Investment Research
<h2>LSTR: Key Risks to Watch </h2>
The company&#39;s prospects are being negatively affected by softness in freight market demand. In the second quarter of 2024, total loadings of machinery dropped by 12% year over year. Similarly, loadings for automotive equipment and parts fell by 1%, while building products and hazardous materials decreased by 1% and 14%, respectively.
Moreover, substitute linehaul loadings, which had been one of the strongest performers during the pandemic and are highly sensitive to consumer demand, decreased by 29% compared to the second quarter of 2023.
As a result, Landstar&#39;s top line is expected to remain weak in the near term. For the third quarter of 2024, the company anticipates a decline in truckloads in the range of 6-10% year over year.
The trucking industry is also grappling with a persistent driver shortage. As seasoned drivers retire, companies struggle to attract new talent, particularly from younger generations, who may not find the profession appealing.
<h2>LSTR&#39;s Zacks Rank</h2>
LSTR currently carries a Zacks Rank #3 (Hold).
<h2>Stocks to Consider</h2>
Some better-ranked stocks for investors&#39; consideration in the Zacks Transportation sector include Ryanair (NASDAQ: <a class="ticker" href="https://www.benzinga.com/stock/ryaay#NASDAQ">RYAAY</a>) and Canadian Pacific Kansas City Limited (NYSE: <a class="ticker" href="https://www.benzinga.com/stock/cp#NYSE">CP</a>).
Ryanair currently sports a Zacks Rank #1 (Strong Buy).&nbsp;RYAAY has an expected earnings growth rate of 10% for the current year.
The company has a discouraging earnings surprise history. Its earnings outpaced the Zacks Consensus Estimate in two of the trailing four quarters and missed twice, delivering an average miss of 30%. Shares of RYAAY have risen 10.2% in the past year.
Canadian Pacific also sports a Zacks Rank #1 at present and has an expected earnings growth rate of 0.3% for the current year.
The company has an encouraging track record with respect to the earnings surprise, having surpassed the Zacks Consensus Estimate in three of the trailing four quarters and missing once. The average beat is 2.2%. CP shares have rallied 10.6% in the past year.
<a href="https://www.zacks.com/stock/news/2348380/here-s-why-investors-should-hold-on-to-landstar-stock-now?cid=CS-BENZ-FT-analyst_blog|rank_focused-2348380">To read this article on Zacks.com click here.</a>

Here's Why Investors Should Hold on to Landstar Stock Now

Goldman Sachs analyst Jordan Alliger maintains Landstar System (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/LSTR#NASDAQ">LSTR</a>) with a Sell and lowers the price target from $165 to $158.

Price Target

Goldman Sachs Maintains Sell on Landstar System, Lowers Price Target to $158

Evercore ISI Group analyst Jonathan Chappell maintains Landstar System (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/LSTR#NASDAQ">LSTR</a>) with a In-Line and lowers the price target from $167 to $165.

Evercore ISI Group Maintains In-Line on Landstar System, Lowers Price Target to $165

Stifel analyst J. Bruce Chan maintains Landstar System (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/LSTR#NASDAQ">LSTR</a>) with a Hold and lowers the price target from $164 to $160.

Stifel Maintains Hold on Landstar System, Lowers Price Target to $160

TD Cowen analyst Jason Seidl maintains Landstar System (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/LSTR#NASDAQ">LSTR</a>) with a Hold and raises the price target from $171 to $176.

TD Cowen Maintains Hold on Landstar System, Raises Price Target to $176

JP Morgan analyst Brian Ossenbeck maintains Landstar System (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/LSTR#NASDAQ">LSTR</a>) with a Neutral and raises the price target from $182 to $188.

JP Morgan Maintains Neutral on Landstar System, Raises Price Target to $188

Benchmark analyst Christopher Kuhn reiterates Landstar System (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/LSTR#NASDAQ">LSTR</a>) with a Hold.

Reiteration

Benchmark Reiterates Hold on Landstar System

Raymond James analyst Felix Boeschen maintains Landstar System (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/LSTR#NASDAQ">LSTR</a>) with a Outperform and lowers the price target from $205 to $195.

Raymond James Maintains Outperform on Landstar System, Lowers Price Target to $195

Susquehanna analyst Bascome Majors maintains Landstar System (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/LSTR#NASDAQ">LSTR</a>) with a Neutral and raises the price target from $160 to $165.

Susquehanna Maintains Neutral on Landstar System, Raises Price Target to $165

Landstar System (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/LSTR#NASDAQ">LSTR</a>) reported quarterly earnings of $1.48 per share which beat the analyst consensus estimate of $1.46 by 1.37 percent. The company reported quarterly sales of $1.225 billion which missed the analyst consensus estimate of $1.248 billion by 1.86 percent. This is a 10.84 percent decrease over sales of $1.374 billion the same period last year.

Earnings Beats

Landstar System Q2 2024 GAAP EPS $1.48 Beats $1.46 Estimate, Sales $1.225B Miss $1.248B Estimate

Wolfe Research analyst Scott Group downgrades Landstar System (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/LSTR#NASDAQ">LSTR</a>) from Outperform to Peer Perform.

Downgrades

Wolfe Research Downgrades Landstar System to Peer Perform

Morgan Stanley analyst Ravi Shanker maintains Landstar System (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/LSTR#NASDAQ">LSTR</a>) with a Equal-Weight and lowers the price target from $147 to $145.

Morgan Stanley Maintains Equal-Weight on Landstar System, Lowers Price Target to $145

Evercore ISI Group analyst Jonathan Chappell maintains Landstar System (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/LSTR#NASDAQ">LSTR</a>) with a In-Line and raises the price target from $161 to $173.

Evercore ISI Group Maintains In-Line on Landstar System, Raises Price Target to $173

Raymond James analyst Felix Boeschen reinstates Landstar System (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/LSTR#NASDAQ">LSTR</a>) with a Outperform and announces $205 price target.

Initiation

Raymond James Reinstates Outperform on Landstar System, Announces $205 Price Target

Stifel analyst J. Bruce Chan maintains Landstar System (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/LSTR#NASDAQ">LSTR</a>) with a Hold and lowers the price target from $166 to $164.

Stifel Maintains Hold on Landstar System, Lowers Price Target to $164

Susquehanna analyst Bascome Majors maintains Landstar System (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/LSTR#NASDAQ">LSTR</a>) with a Neutral and lowers the price target from $165 to $160.

Susquehanna Maintains Neutral on Landstar System, Lowers Price Target to $160

Landstar System (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/LSTR#NASDAQ">LSTR</a>) reported quarterly earnings of $1.32 per share which beat the analyst consensus estimate of $1.31 by 0.76 percent. The company reported quarterly sales of $1.171 billion which beat the analyst consensus estimate of $1.122 billion by 4.36 percent. This is a 18.45 percent decrease over sales of $1.436 billion the same period last year.

Landstar System Q1 2024 GAAP EPS $1.32 Beats $1.31 Estimate, Sales $1.171B Beat $1.122B Estimate

<div>INDIANAPOLIS — The Scopelitis Transportation Law Seminar is a three-day parade of speakers and panels discussing everything from what states' license plates fleets should seek to slap on their trucks to the treatment of owner-operators whose trucks leave the road for maintenance. The gathering examines hundreds of legal situations fleets might face.</div>

Here are five takeaways from the multitude of subjects the seminar covered.

<h2 id="h-the-growing-focus-on-lease-purchase-agreements">The growing focus on lease purchase agreements</h2>

The ongoing task force created by the Federal Motor Carrier Safety Administration to study — investigate? — lease purchase agreements had a recent and largely negative moment in the sun with a public hearing at the Mid-America Trucking Show. Sentiment from panelists at the current Scopelitis seminar has so far not generally been supportive of the contracts, which are seen as either a pathway to truck ownership or an oppressive way fleets secure capacity from drivers who need to work endlessly to stay afloat.

Jeffrey S. Jackson, a Scopelitis partner, said in a short presentation that the deals are "very, very common in the industry for sure, although it's not nearly as common for them to be handled correctly."

"Oftentimes, folks will see lease purchase programs as kind of an automatically safe way to create more and more operators" Jackson said. "But the truth is really much more complex than that." As far as a method of securing capacity, Jackson described lease purchase deals as "not an answer." Rather, they are a "potential business solution" to recruitment challenges.

Jackson said the focus for fleets should be to avoid getting situations where the lease purchase deal results in a misclassification action against them either by a government agency or in a lawsuit by a disgruntled driver. One suggestion: A fleet should not do its own lease purchase deals. It should hire a third-party provider of the contractual arrangement.

<h2 id="h-the-big-orange-company-doesn-t-see-a-driver-shortage">The big orange company doesn't see a driver shortage</h2>

A notable moment came during a fireside chat at Monday's lunch session. Chris Spear, president of the American Trucking Associations, sat next to Thomas Jackson, general counsel of Schneider National (NYSE: <a class="ticker" href="https://www.benzinga.com/stock/sndr#NYSE">SNDR</a>). Spear and the ATA have been the loudest promoters of the view that there is a driver shortage.

But Jackson begged to differ. "We don't see the driver shortage" he said, turning to Spear. "We believe that truck driver hiring and retention follows freight markets." And now, with a weak freight market, Jackson said, "we're not having a problem hiring drivers." Schneider does so at a clip of 400 to 500 new drivers every week.

That doesn't mean it isn't a challenge. Jackson talked about three recent departures, all of whom joined private fleets. "They're home every night, they have a regular schedule and private fleets pay more than commercial fleets" he said.

Drivers "want to be home at night with their families, and they want to be paid" Jackson said.

<img alt="" src="https://www.freightwaves.com/wp-content/uploads/2024/04/16/img_6212.jpg" />

From left to right: Chris Spear, ATA; Thomas Jackson, Schneider National;

Mike Kneller, Landstar; Anthony Spalvieri, FedEx; Greg Feary, Scopelitis

<h2 id="h-more-inspections-by-fmcsa">More inspections by FMCSA</h2>

Stephen Keppler laid out a lot of numbers about safety, and they all pointed to higher crash and death rates. One thing that that has led to is more inspections by FMCSA and, in particular, more inspections on-site to reverse an earlier trend that has proved less valuable.

"FMCSA had done some analysis indicating, well, the off-site inspections are actually pretty good" said Keppler, a co-director of Scopelitis Consulting. "They're helping us conserve resources, save time and money, and we can get more of them done."

But he said that is not the case. "The reality is, they're not as effective as they were when you look at the data" he said. "They were not finding as many critical violations."

The result has been the  shift in recent years toward on-site inspections. The frequency of inspections has increased by the thousands since 2020, Keppler said, with much of that coming in more on-site inspections.

Keppler said inspections are "more comprehensive and more focused." FMCSA is taking more enforcement actions and assigning more negative ratings as a result of these investigations, he added.

<h2 id="h-the-cautious-market-for-m-amp-a">The cautious market for M&amp;A</h2>

If there's a discussion about mergers and acquisitions in the logistics industry, the conversation isn't complete unless Spencer Tenney of Tenney &amp; Co. is in the mix. And he was on a panel at the Scopelitis seminar that took up the subject.

"What you probably won't see in the next year are these large, industry-shaping, transformational deals" Tenney said, adding that there is "still a tremendous amount of activity in engagement." He echoed a common theme from recent discussions about M&amp;A: that the sharp rise in valuations during the strong freight market of 2021 and into 2022, followed by a sharp decline, has left both sides of the equation shell-shocked. Some sellers wanted to exit the market in 2020 but "got caught up in the cycle" and didn't sell.

"Now what we're seeing is not an ideal market but certainly a much more stable environment than we saw six to 12 months ago" Tenney said. But a problem is that "strategic buyers" who would acquire a logistics company to combine with existing logistics assets, are facing an average cost per mile per truck that has risen in excess of 21% in the past year, he said. "That's not something you can absorb or offset organically."

The result then, according to Tenney, are deals with "a tremendous amount of structure being used to align goals for both buyers and sellers." And while some sellers might not be crazy about that reality, presumably preferring cash transactions, Tenney praised the "open-mindedness that we're seeing both from buyers and sellers to get deals done in this environment."

<h2 id="h-is-esg-a-thing-in-trucking">Is ESG a thing in trucking?</h2>

On the Monday lunch panel were representatives of two publicly traded companies: Schneider's Jackson and Mike Kneller, the general counsel of Landstar (NASDAQ: <a class="ticker" href="https://www.benzinga.com/stock/lstr#NASDAQ">LSTR</a>). Not surprisingly, their view on the impact of environmental, social and governance standards — ESG — might not line up with those of some smaller companies.

Because Landstar is publicly traded, Kneller said, "we have the ESG element to be concerned with in terms of how our investors perceive us." He said Landstar goes so far as to publicly release its Scope 3 greenhouse gas emissions numbers, which the Environmental Protection Agency defines as "the result of activities from assets not owned or controlled by the reporting organization, but that the organization indirectly affects in its value chain." For Landstar, those emissions are two steps away from the company itself.

That drew a response from Jackson: "Did I understand you correctly that you publish your Scope 3 emissions?" he asked, signaling that it isn't the norm.

Landstar discloses them even though the Securities and Exchange Commission has backed away from requiring that disclosure.

Kneller said the governance portion of ESG is not an issue for Landstar, a statement most companies might make about themselves. The social and environmental components "are where there's a little bit more discussion" he added. And regarding those activities, the discussion mostly focuses on climate change and emissions, according to Kneller.

Landstar has 25,000 customers, he said, and the vast majority don't care about the company's ESG ratings. But the ones that do, he added, are "our largest, most sophisticated multinational customers: the ones that are often are European-based or they are multinational based in the U.S."

The post <a href="https://www.freightwaves.com/news/scopelitis-seminar-delves-into-lease-purchase-deals-ma-esg-and-more">Scopelitis seminar delves into lease purchase deals, M&amp;A, ESG and more</a> appeared first on <a href="https://www.freightwaves.com">FreightWaves</a>.

Scopelitis Seminar Delves Into Lease Purchase Deals, M&A, ESG and More

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Landstar System (NASDAQ:LSTR) Stock, Quote.Headers.trade-ideas