Landstar expects to emerge a winner in post-Montgomery world

Management sees this segment of capacity potentially growing faster following the Supreme Court’s Montgomery v. Caribe Transport II ruling, which widened liability exposure for freight brokers found negligent in their driver hiring practices. The company said it is also having success courting small brokers looking to partner with brokers with better tech, vetting protocols and insurance programs.

It recently inked a deal with a Midwest broker to become a Landstar agent. The broker is generating approximately $18 million in annual revenue, much larger than most new Landstar agents, which have less than $5 million in revenue.

Landstar has culled its approved carrier list from over 100,000 in 2022 to 64,600 in the recent quarter. It originally started the exercise to weed out cargo theft. Landstar’s approved truck brokerage carrier list was down another 7% y/y in the second quarter after falling 19% in the first quarter.

Q2 EPS miss explained

Landstar reported second-quarter earnings per share of $1.44, which was 24 cents higher y/y but 4 cents below the consensus estimate. Consolidated revenue of $1.43 billion was 18% higher y/y and ahead of the $1.34 billion consensus estimate.

Landstar called out $10.5 million (23 cents per share) in unfavorable developments on prior-year claims as a headwind to second-quarter EPS. Also, the consensus EPS estimate gapped up from $1.35 to $1.48 in the 90 days leading up to the print, according to Yahoo Finance. Analysts raised numbers for carriers and brokers as TL spot market conditions firmed throughout the quarter.

Total truck revenue jumped 19% y/y to $1.33 billion as loads increased 2% and revenue per load surged 17%. Higher diesel fuel prices along with higher TL rates drove the yield increase. Management said that both truck volumes and revenue per load outpaced normal seasonal patterns in the quarter.

The company normally sees no material change in truck revenue from the second to the third quarter, but both July truck loads and yields are above typical sequential seasonal trends (5% and 26% higher y/y, respectively).

In the second quarter, dry van loads increased 5% y/y, with revenue per load up 16%. Flatbed loads grew 2%, with yield up 20%.

Variable contribution, or net revenue, increased 17% y/y to $199 million. (The calculation measures revenue remaining after purchased transportation expenses and agent commissions are paid.) A variable contribution margin of 13.9% was 20 bps lower y/y.

The operating margin (as a percentage of variable contribution) improved 20 bps y/y to 33.2%.

Insurance and claims expenses (as a percentage of BCO revenue) increased 40 bps to 7% even though it “experienced a lower DOT accident frequency [0.62 reportable accidents per one million miles] during the 2026 first half.” It said unfavorable developments on prior claims were the drag.

Management said it “did quite well” with a June insurance renewal. The auto liability insurance tower renewed unchanged and the broker liability policy was only 3% higher.

Shares of LSTR were down 4.2% in after-hours trading on Tuesday.

Why it matters? Landstar’s commentary on changes to its business following the Supreme Court’s broker liability ruling provides some insight on how the industry is adapting. However, most brokers are unlikely to renew insurance coverage at favorable rates like Landstar recently did.

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