Asset-light transportation manager sees results in-line with expectations, but softer rates coming up ahead.
Landstar Systems reported (Nasdaq: LSTR) record revenue and profit for the fourth quarter as the slowing growth of truckload rates was offset with steady volumes. As for the first quarter, it expects more of the same as rates take seasonal dip, but loads see slight gain.
But investors were nonplussed about the results, with Landstar shares falling slightly less than 1 percent in after hours trading.
The Jacksonville-based asset-light truckload provider reported fourth quarter revenue of $1.182 billion, a 12 percent increase from the year before. Operating expenses of $1.097 billion were up just about the same amount from last year.
Full-year results of $4.6 billion showed even better gains, a 26 percent increase from the year before. Operating expenses of $4.287 billion were up roughly the same amount.
Operating ratio of 7.1 percent during 2018 was an improvement over the 6.7 OR in 2017.
Net income grew 5 percent from a year earlier in the fourth quarter. Earnings per share for the fourth quarter were higher as the company bought back close to 1.5 million shares.
Full-year net income rose close to 45 percent to $255 million, largely thanks to U.S. Federal tax cuts.
Landstar chief executive Jim Gattoni said he was “pleased” with the results, touting its growing relationship with business capacity owners. Trucks in its BCO fleet grew 9 percent to 10,599, an all-time high for the company. Its truck brokerage network reached 59,054, up 18 percent from a year ago.
Truck revenue was up 7 percent versus the prior year against a 4 percent increase in volume. But that rates was a slowdown from the first part of 2018. Still, the company saw 16.7 percent revenue growth versus an 8 percent increase in volumes.
“We experienced a decelerating percentage growth rate in revenue per load on a year-over-year basis compared to the growth rates experienced in the first three quarters of 2018,” Gattoni said. “The price deceleration was due to a much tougher year-over-year comparison applicable to the 2018 fourth quarter and seasonal softness that began at the end of the 2018 third quarter.”
As for the current quarter, Gattoni expects revenue in the range $1.025 billion to $1.075 billion, compared to revenue of $1.047 billion last year.
He says the trucking market is hitting a more typical seasonal slowdown after last year’s strong rates. He says revenue per load in the first quarter typically dips 7 percent in the first quarter. This first quarter, he says revenue per load is expected to see low single-digit percentage range. “We expect a more normal seasonal trend in the 2019 first quarter as rates appear to have stabilized through the first four weeks of January,” Gattoni said.
The after-hours decline was likely the result of investors growing concerned that the first quarter outlook represented results that were starting to “compare negatively,” said Deutsche Bank equity analysts in a research report.
“This is to be expected, given the much more difficult comps, but nonetheless does result in much lower earnings momentum for LSTR shares,” Deutsche Bank said.
“This is to be expected, given the much more difficult comps, but nonetheless does result in much lower earnings momentum for LSTR shares,” Deutsche Bank said. Nonetheless, Deutsche Bank does not expect shares to fall much further, as they are already down 20 percent from their September peak (SONAR: LSTR).
