Freight broker Landstar System has seen pricing moderate since the spot market’s decline early in the second quarter. Revenue per mile for dry van loads hauled by its business capacity owners (BCOs) fell 6% sequentially in both April and May but has held steady since. The metric excludes fuel surcharges and is only off 13% from the February high.
Landstar (NASDAQ: LSTR) reported second-quarter earnings per share of $3.05 Wednesday after the market closed, 20 cents below the consensus estimate and 17 cents below the low end of management’s guidance range. The company noted higher than expected insurance and claims expense, due mostly to “two tragic vehicular accidents that occurred during the quarter,” as a reason for the earnings miss.
Total revenue during the period was 26% higher year over year (y/y) at $1.98 billion. The result was slightly below management’s guidance range of $2 billion to $2.05 billion. Loads hauled by truck were expected to increase between 11% and 13% y/y, with revenue per truck load expected to climb by a midteen percentage y/y. Both metrics were up just 10%.
On a Thursday call with analysts, management said a 4% decline in total truck revenue per load from April to May and a 6% y/y decline in length of haul during the quarter were also contributors to the miss.
However, the company’s third-quarter guidance was better than expected.
Management is forecasting revenue to be in a range of $1.8 billion to $1.85 billion, which was ahead of the $1.77 billion consensus estimate at the time of the print. Truck loads are expected to increase between 3% and 5% y/y, with truck revenue per load flat y/y. Normally, revenue per load steps slightly higher from June to July each year but the metric has remained flat so far in July, holding the level established in May.
“Given the current operating environment, I view Landstar’s relatively stable revenue per load since May as a positive,” said Jim Gattoni, president and CEO.
Variable contribution, or revenue less purchased transportation and agent commissions, increased 21% y/y to $268 million, but the margin fell 50 basis points to 13.5%. Gross profit margin, which includes other variable costs like trailer depreciation and certain IT and insurance-related expenses, was down 60 bps to 10.5%. The operating margin, operating income as a percentage of variable contribution, increased 90 bps to 56.2%.
Total capacity on Landstar’s platform was up 25% y/y to 111,126 providers. Trucks provided by BCOs increased 2.9% y/y but dipped 0.4% from the first quarter.
Debt to capital was 11% at the end of the quarter. Year to date, Landstar has generated $210 million in cash flow from operations, a 53% increase from the same period last year.
In conjunction with the earnings report, Landstar announced that it has raised the regular quarterly dividend by 20% to 30 cents per share. The company repurchased $213 million in stock through the first half of 2022.
