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Updated: Landstar guides lower due to ‘tragic accident’ and unfavorable market conditions

In an 8-k filing with the Securities and Exchange Commission, Landstar System, Inc. (NASDAQ: LSTR) announced that third quarter 2019 earnings expectations will fall short of its prior guidance due to a “tragic vehicular accident” and weaker than anticipated market conditions.

Landstar stated that a business capacity owner (BCO) independent contractor “with a subsidiary of the company” was involved in the accident during the third quarter. The accident is expected to “adversely impact insurance and claims costs in the 2019 third quarter.”  

The filing also stated that the company is expected to see revenue for the quarter at the low end of its previously issued guidance range, citing truck revenue per load and the number of loads hauled via truck through the first two months of the third quarter as the reasons.  

In his live presentation at the Morgan Stanley 7th Annual Laguna Conference on Sept. 12, Landstar’s president and CEO James B. Gattoni said that loads were 3.5% lower year-over-year in the first two months of the third quarter and that revenue per load was down 13.5% over the same period. Both of these metrics “are at or slightly below the low end” of the company’s prior guidance range.

Gattoni said that Landstar saw normal sequential trends in June, July, August and so far in September. He said that pricing has followed normal seasonality, but volumes are lagging a little. Dry van and flatbed loads are off about the same amount.

With the lower revenue expectation and increased insurance and claims costs, the company expects to miss the low end of its prior earnings per share (EPS) range.

In its second quarter 2019 earnings release, LSTR issued third quarter 2019 guidance calling for a low single-digit decline in loads hauled via truck, a low double-digit decline in revenue per truck load, revenue of $1.01 to $1.06 billion and EPS of $1.48 to $1.54.

LSTR’s current consensus EPS estimate for the third quarter 2019 is $1.51.

Gattoni believes that declines in U.S. manufacturing and a decent number of shippers switching to dedicated operations from contractual or spot have been the factors negatively impacting the spot market the most. He said some shippers moved to dedicated service offerings after they struggled to find capacity in 2018’s tight truck market and that it may take time before they return, if ever, to the spot market.

He categorized the current market as a largely normal market cycle that’s playing out. Last year was a very strong year for the TL market and it has cooled a bit in 2019. He said that rates are still 4% higher than 2017 (Landstar’s gross profit is 12% higher), but drivers are viewing current spot rates as a pay cut from last year’s rate outperformance.

Gattoni believes that we are in the “middle of the truck supply market [cycle].” He said that bankruptcies are occurring and carriers are exiting, but truck builds and deliveries are still very high. This likely needs more time to play out. When asked if the spot market improves in the fourth quarter, Gattoni said that pricing will likely hold and noted that year-over-year comparisons will be easier in the period. In regards to volumes, he expects to see a continuation of the current trend. In sum, he thinks the fourth quarter “will look a lot like the third quarter.”

When asked about the 2020 spot market, he didn’t want to offer a guess, but said that “ I would love to see at least a 3% increase, but I’m not sure that’s realistic .” He went on to say that there’s just too much uncertainty in the market, specifically calling out trade tensions. 

Landstar has experienced large jury verdicts for accidents in the past ($40 million being the highest in 2011). Landstar self-insures and retains liability up to $5 million per occurrence.

Shares of LSTR are down more than 3% on the news.

LST stock chart – SONAR: STOCK.LSTR

The FREIGHTWAVES TOP 500 For-Hire Carriers list includes Landstar System (No. 6).


  1. Rates were average 2018 for Landstar BCOs at least for me while everyone else’s went up. Now they’re better than a lot of other carriers in 2019 on the spot market. I still get the “$1100 can you help me out” for a head haul market 800 mile trips. How can you have lost profit when it’s up from previous years. Think I see a CEO being fired. You should be sued by 8,000 drivers. I saw this market coming last year. Why didn’t you? I don’t have a MBA.

Todd Maiden

Based in Richmond, VA, Todd is the finance editor at FreightWaves. Prior to joining FreightWaves, he covered the TLs, LTLs, railroads and brokers for RBC Capital Markets and BB&T Capital Markets. Todd began his career in banking and finance before moving over to transportation equity research where he provided stock recommendations for publicly traded transportation companies.