Stock Story -
Freight delivery company Landstar (NASDAQ:LSTR) fell short of analysts' expectations in Q2 CY2024, with revenue down 11% year on year to $1.23 billion. It made a GAAP profit of $1.48 per share, down from its profit of $1.85 per share in the same quarter last year.
Is now the time to buy Landstar? Find out by reading the original article on StockStory, it's free.
Landstar (LSTR) Q2 CY2024 Highlights:
- Revenue: $1.23 billion vs analyst estimates of $1.25 billion (2.1% miss)
- EPS: $1.48 vs analyst estimates of $1.46 (1.5% beat)
- Gross Margin (GAAP): 22.4%, up from 21.3% in the same quarter last year
- Market Capitalization: $6.84 billion
Covering billions of miles throughout North America, Landstar (NASDAQ:LSTR) is a transportation company specializing in freight and last-mile delivery services.
Ground TransportationThe growth of e-commerce and global trade continues to drive demand for shipping services, especially last-mile delivery, presenting opportunities for ground transportation companies. The industry continues to invest in data, analytics, and autonomous fleets to optimize efficiency and find the most cost-effective routes. Despite the essential services this industry provides, ground transportation companies are still at the whim of economic cycles. Consumer spending, for example, can greatly impact the demand for these companies’ offerings while fuel costs can influence profit margins.
Sales GrowthA company’s long-term performance can give signals about its business quality. Even a bad business can shine for one or two quarters, but a top-tier one tends to grow for years. Over the last five years, Landstar grew its sales at a weak 1.9% compounded annual growth rate. This shows it failed to expand in any major way and is a rough starting point for our analysis.
Long-term growth is the most important, but within industrials, a half-decade historical view may miss new industry trends or demand cycles. Landstar's history shows it grew in the past but relinquished its gains over the last two years, as its revenue fell by 19.9% annually.
Landstar also breaks out the revenue for its most important segments, Van Equipment and Platform Equipment, which are 50.5% and 31.1% of revenue. Over the last two years, Landstar's Van Equipment revenue (full truckload van transportation) averaged 20.3% year-on-year declines while its Platform Equipment revenue (full truckload trailer transportation) averaged 8.6% declines.
This quarter, Landstar missed Wall Street's estimates and reported a rather uninspiring 11% year-on-year revenue decline, generating $1.23 billion of revenue. Looking ahead, Wall Street expects sales to grow 10.5% over the next 12 months, an acceleration from this quarter.
Operating MarginOperating margin is a key measure of profitability. Think of it as net income–the bottom line–excluding the impact of taxes and interest on debt, which are less connected to business fundamentals.
Landstar was profitable over the last five years but held back by its large expense base. It demonstrated mediocre profitability for an industrials business, producing an average operating margin of 7%. This result isn't too surprising given its low gross margin as a starting point.
Looking at the trend in its profitability, Landstar's annual operating margin might have seen some fluctuations but has remained more or less the same over the last five years, which doesn't help its cause.
This quarter, Landstar generated an operating profit margin of 5.6%, in line with the same quarter last year. This indicates the company's cost structure has recently been stable.
EPSWe track the long-term growth in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company's growth was profitable.
Landstar's flat EPS over the last five years was below its 1.9% annualized revenue growth. However, its operating margin didn't change during this timeframe, telling us non-fundamental factors affected its ultimate earnings.
Like with revenue, we also analyze EPS over a more recent period because it can give insight into an emerging theme or development for the business. For Landstar, its two-year annual EPS declines of 28.4% show its recent history was to blame for its underperformance over the last five years. These results were bad no matter how you slice the data.
In Q2, Landstar reported EPS at $1.48, down from $1.85 in the same quarter last year. Despite falling year on year, this print beat analysts' estimates by 1.5%. Over the next 12 months, Wall Street expects Landstar to grow its earnings. Analysts are projecting its EPS of $6.13 in the last year to climb by 14.5% to $7.02.
Key Takeaways from Landstar's Q2 Results We struggled to find many strong positives in these results as its revenue unfortunately missed and EPS only slightly beat Wall Street's estimates. Overall, this quarter could have been better. The stock remained flat at $193.87 immediately after reporting.
