Landstar earnings tumble in Q2, first half 2016

Asset-light third-party logistics provider Landstar System posted a net income of $61.5 million on $1.49 billion in revenues for the first half of 2016, decreases of 12.8 percent and 8.8 percent, respectively, compared with the same 2015 period.    Landstar System, Inc. saw its earnings and revenues fall in the second quarter and first half of 2016 compared with the same periods the previous year, according to the company’s most recent financial statements.
   The Jacksonville, Fla.-based asset-light third-party logistics provider reported net income tumbled 20.2 percent year-over-year to $40.5 million for the second quarter on revenues that slid 10.7 percent to $775 million. Diluted earnings per share (EPS) stood at $0.76 per share for the quarter compared with $0.92 per share in second quarter 2015.
   Landstar said net income during the quarter was negatively impacted by elevated insurance and claims costs, the highest quarterly insurance and claims cost in the past 6 years.
   Operating margin – operating income divided by gross profit – stood at 43.9 percent in second quarter 2016, down 6.6 points from 50.5 percent last year.
   Landstar’s truck transportation division posted second quarter revenues of $718.5 million, 93 percent of total company revenues, compared with $809.2 million in second quarter 2015.
  Revenues from rail, air and ocean cargo transportation totaled $45.1 million, 6 percent of total revenues, for the quarter, down from $48.1 million the previous year.
   For the first six months of 2016, Landstar earnings decreased 12.8 percent year-over-year to $61.5 million on revenues that dipped 8.8 percent to $1.49 billion. Diluted EPS fell to $1.45 per share in the first half of 2016 from $1.59 in the same 2015 period.
   In addition, Landstar’s board of directors declared a quarterly dividend of $0.09 per share payable on Aug. 26, 2016, to stockholders of record as of the close of business on Aug. 8, 2016. The dividend includes a 12.5 percent increase to the amount of the company’s quarterly dividend declared following each of the prior four quarters.
   Landstar President and CEO Jim Gattoni said second quarter earnings and revenues were in line with the lower range of updated guidance provided on June 8 and that the company performed relatively well considering a “sluggish freight environment.”
   “Diluted earnings per share of $0.76 for the second quarter was below the low end of the updated guidance due to an increase in estimated insurance and claims costs, as a result of a severe accident that occurred at the end of the second quarter,” said Gattoni.
   “During the 2015 second quarter, we hauled over 13,000 truckloads via unsided/platform equipment for a project on behalf of a customer in the automotive sector, generating $27 million of revenue in the 2015 second quarter,” he noted. “Excluding the loadings related to that project we experienced a slight increase in loads hauled via truck over the 2015 second quarter.
   “However, Landstar’s truckload services continued to experience significant pricing pressure throughout the 2016 second quarter, as industry-wide truck capacity was more readily available as compared to the 2015 second quarter and demand continued to be soft. Although we experienced a somewhat normal seasonal uptick in revenue per load from May to June, the pricing pressure continued in the U.S. spot market, in which the Company operates much of its business.
   “Additionally, the average cost of a gallon of diesel fuel was approximately 20 percent lower during the 2016 second quarter compared to the 2015 second quarter putting additional pressure on pricing, especially as it relates to loads hauled via truck brokerage carriers. As such, revenue per load on loads hauled via truck was 9 percent lower in the 2016 second quarter compared to the 2015 second quarter.”
   Looking forward to the rest of the year, Gattoni said year-over-year comparisons in the third quarter will continue to be skewed by the abovementioned special automotive project.
   “The company’s 2015 third quarter included approximately $35 million in revenue from approximately 20,000 loads hauled via truck related to that project,” which was completed at the end of 2015, he said, adding that historically, third quarter revenues tend to be relatively consistent with those generated in the second quarter.
   “As such, I expect 2016 third quarter revenue to be similar to the company’s 2016 second quarter revenue,” said Gattoni. “Assuming insurance and claims costs in the 2016 third quarter are approximately 3.2 percent of BCO revenue, representing average insurance and claims costs as a percent of BCO revenue over the past 5 years, I would expect diluted earnings per share to be in a range of $0.79 to $0.84 in the 2016 third quarter.”