Landstar System, a prominent brokerage company, anticipates a potential turning point in the freight market around midyear. The company’s management highlighted that the current cycle of revenue decline, extending for six consecutive quarters, aligns with typical cycles lasting between six and eight quarters.
In its recent fourth-quarter earnings report, Landstar (NASDAQ: LSTR) disclosed earnings per share of $1.62, meeting consensus estimates but showing a significant 98-cent decrease compared to the previous year. The company attributed this decline partly to one fewer operating week in the recent period than in the previous year, creating challenges for year-over-year comparisons.
Despite management’s guidance, revenue plummeted by 28% year over year to $1.2 billion, with performance falling below expectations. Total truckloads also dropped by 22% year over year, accompanied by a 10% decrease in revenue per load. According to management, the sequential decline observed in January aligns with seasonal trends.
Landstar experienced a moderate reduction in truckload capacity, particularly from business capacity owners (BCOs) who operate trucks exclusively for the company. BCO trucks were down 13% year over year and 4% sequentially, with some citing financial constraints for not currently operating. However, the company remains optimistic that these BCOs will return once market conditions improve.
In addressing concerns about brokerage spreads and retaining BCOs, Landstar’s management expressed confidence in the market’s ability to adjust to cost inflation over time. They noted that pricing in the trucking industry tends to align with cost increases within a year or two.
Looking ahead to the first quarter, Landstar projects a revenue range of $1.1 billion to $1.15 billion, indicating a 22% decline at the midpoint. Load volumes are expected to decrease by 14% to 16%, with revenue per load dropping by 8% to 10%. Despite these challenges, the company remains focused on managing expenses, navigating market shifts, and maintaining a competitive margin.
As CEO Jim Gattoni prepares to retire, Frank Lonegro, CFO at Beacon (NASDAQ: BECN), will take the reins at Landstar. Despite current market pressures and uncertainties, Landstar’s leadership remains committed to addressing industry challenges and driving sustainable growth.
