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LANDSTAR SYSTEM INC (LSTR)·Q1 2025 Earnings Summary

Executive Summary

  • Landstar’s Q1 2025 revenue of $1.153B modestly declined year over year but landed above the midpoint of prior guidance; EPS of $0.85 reflected a $0.10 per-share charge from an international freight forwarding supply chain fraud and highly elevated insurance and claims costs (9.3% of BCO revenue), which together pressured profitability .
  • Versus S&P Global consensus, Landstar delivered a small top-line beat (Revenue $1.153B vs $1.133B consensus*) but an EPS miss ($0.85 vs $0.94 consensus*), driven by the fraud charge and adverse prior-year claims development in insurance .
  • Management did not issue formal Q2 guidance, but flagged April loads ~2% below last year and revenue per load ~1% above last year; normal seasonal sequential gains in loads are “unlikely,” with typical 30–40 bps variable contribution margin compression from Q1 to Q2 expected .
  • Strategic bright spots included Heavy Haul revenue growth (+6% YoY) and a rare sequential volume outcome where Q1 truckload volumes exceeded Q4 for the first time in 15 years, positioning LSTR for operating leverage when the cycle turns .

What Went Well and What Went Wrong

  • What Went Well

    • Heavy Haul strength: revenue up ~6% YoY on 3% higher volume and 3% higher revenue per load; management called Heavy Haul a strategic focus with broad-based end-market momentum (machinery, electrical, energy) .
    • Unusual sequential volume positive: first time in at least 15 years that Q1 truckload volumes exceeded Q4, suggesting improving underlying activity despite soft demand .
    • Capital returns and balance sheet: $60.9M of buybacks (~386k shares) and $83.3M dividends in Q1; board raised the quarterly dividend 11% to $0.40; cash and short-term investments ~$473M .

  • What Went Wrong

    • Profitability hit from insurance and claims: insurance and claims were 9.3% of BCO revenue (vs ~4.9% historical average), with ~$11M net unfavorable prior-year development and higher cargo theft and accident severity; EPS impact from insurance costs was ~-$0.31 vs internal planning .
    • Supply chain fraud charge: $4.8M pre-tax charge (~$0.10 per share) from a unique, isolated forwarding fraud (under investigation); management does not expect significant additional charges beyond professional fees .
    • Cross-border and van softness: tariff uncertainty pressured U.S.–Mexico and U.S.–Canada flows; van revenue per load declined YoY; Q1 truck revenue per load −0.6% YoY and −4.6% sequentially .

Financial Results

MetricQ3 2024Q4 2024Q1 2025
Revenue ($USD Billions)$1.214 $1.209 $1.153
Gross Profit ($USD Millions)$112.7 $109.4 $98.3
Gross Margin (%)9.3% 9.0% 8.5%
Variable Contribution ($USD Millions)$171.4 $166.5 $161.3
Variable Contribution Margin (%)14.1% 13.8% 14.0%
Operating Income ($USD Millions)$63.1 $57.8 $39.4
Net Income ($USD Millions)$50.0 $46.2 $29.8
Diluted EPS ($)$1.41 $1.31 $0.85

Segment/service mix (revenue):

ServiceQ1 2024 ($MM)Q1 2025 ($MM)YoY
Truckload – Van$628.3 $594.8 −5.3%
Truckload – Unsided/Platform$343.0 $340.4 −0.8%
Less-than-Truckload$25.6 $22.4 −12.5%
Other Truck Transportation (incl. power-only)$72.0 $92.1 +27.9%
Rail Intermodal$22.7 $17.5 −23.0%
Ocean & Air$54.1 $65.6 +21.3%
Other$25.3 $19.7 −22.4%
Total$1,171.0 $1,152.5 −1.6%

Key KPIs:

KPIQ1 2024Q1 2025
Total Loads (All modes)506,590 500,170
Total Truck Loads490,720 484,900
Truck Revenue per Load ($)2,178 2,165
BCO Revenue Share (%)39% 37%
Truck Brokerage Carriers Share (%)53% 54%
BCO Trucks (units)9,410 8,620
Total Available Truck Capacity Providers80,858 88,469
Insurance & Claims (% of BCO revenue)5.8% 9.3%
DOT Reportable Accidents per MM miles (Q1)—0.69
Cash + Short-term Investments ($MM)—~$473
Share Repurchases—~386k shrs / $60.9M
Dividend (Declared)$0.33 $0.40 (payable 6/24/25)

Estimate comparison (S&P Global):

MetricQ1 2025 ConsensusQ1 2025 ActualSurprise
Revenue ($MM)1,133.2*1,152.5 +1.7%
EPS ($)0.94*0.85 −9.6%

Values with an asterisk (*) are retrieved from S&P Global.

Guidance Changes

MetricPeriodPrevious GuidanceUpdate/CurrentChange
RevenueQ1 2025$1.075B–$1.175B (1/29) Finished $1.153B In range; above midpoint
EPSQ1 2025$1.05–$1.25 (1/29) Replaced on 4/2; EPS expected $0.90–$0.95 due to elevated insurance. Additional preliminary fraud impact indicated −$0.35 to −$0.50 (pre-recoveries) Lowered (EPS guidance withdrawn/replaced)
EPS (actual)Q1 2025—$0.85 including ~$0.10 fraud charge Below original range
Loads vs LYQ1 2025−7% to −2% Actual −1.2% Better than range
Truck RPL vs LYQ1 2025−2% to +3% Actual −0.6% In range (lower half)
VC MarginQ1 202514.0%–14.3% Actual 14.0% Met low end
Insurance & ClaimsQ1 2025~6.0% of BCO revenue 9.3% Worse
Q2 Revenue/LoadsQ2 2025—April loads ~2% below LY; RPL ~1% above LY; unlikely to achieve normal seasonal +8% loads; typical 30–40 bps VC margin compression from Q1 to Q2 Commentary only
Q2 SG&A itemsQ2 2025—Agent convention $2–$3M; no significant additional fraud charges expected beyond legal/pro fees; $12M reinsurance “no claims bonus” to be deferred until claims resolved New items

Earnings Call Themes & Trends

TopicQ3 2024 (10/29/24)Q4 2024 (1/29/25)Q1 2025 (5/13/25)Trend
Heavy HaulFocus area; strength developing Record FY24; Q4 HH revenue +24% YoY, strong pricing Q1 HH revenue +6% YoY; broad end-markets; leadership additions Improving; strategic emphasis sustained
Supply chain/cargo theft—Elevated cargo theft/fraud raised insurance costs Severity up; fraud dept, tech vendors; AI tools mentioned; unique forwarding fraud charge Heightened risk; mitigation expanding
Tariffs/macro—Watching policy shifts; guidance excluded tariff impacts Tariff uncertainty pressured U.S.–MX/CA; pull-forward possible; English proficiency rule may tighten capacity Macro/tariff headwinds; potential capacity tailwind
Capacity/BCO fleet—BCO count down ~10% YoY; turnover moderating BCO declines moderating; best q/q net truck trend in 12 quarters YTD; carrier vetting expanded Stabilizing; quality controls increasing
Ocean/Air—Q4 ocean rates up helped non-truck Sequential slide in ocean revenue per shipment into Q1; still YoY positive Rolling over sequentially
Safety—FY24 DOT accident frequency 0.59 Q1 2025 0.69, still below national averages Strong; small uptick

Management Commentary

  • “Importantly, this was the first time in fifteen years that the number of loads hauled via truck during the first quarter exceeded the immediately preceding fourth quarter.” – CEO Frank Lonegro .
  • “Heavy haul revenue was up an impressive 6% year-over-year in the first quarter… loadings up ~3% and revenue per heavy haul load up 3%.” – CFO James Todd .
  • “2025 first quarter EPS… included a $4.8 million pretax charge or $0.10 per share relating to [a supply chain] fraud… we have our arms all the way around the matter and are vigorously pursuing recoveries.” – CEO Frank Lonegro .
  • “Insurance and claims costs were 9.3% of BCO revenue… primarily due to cargo theft and truck accident adverse claim development.” – CFO James Todd .
  • “Given the… environment… we will be providing second quarter revenue commentary rather than formal guidance.” – CEO Frank Lonegro .

Q&A Highlights

  • Insurance and claims: ~+$11M net unfavorable prior-year development in Q1, with cargo programs contributing ~$7M; severity sharply higher; management reiterated long-run target below Q1 spike but above historical 4.9% near term .
  • Heavy Haul end-markets: breadth across machinery, electrical, building products, energy; dedicated leadership and agent engagement support pipeline .
  • Regulatory/capacity: English proficiency out-of-service criteria could sideline drivers (industry est. up to ~100k impacted); LSTR expects little impact to its BCOs due to high standards—potentially a net capacity tightening positive .
  • April/May cadence: April loads ~2% below LY and RPL ~+1% YoY; early May loads per workday slightly above April, near flat YoY vs May 2024 .
  • Ocean/Air: sequential ocean revenue per shipment slid from ~$11k in Q4’24 to ~$7.5k in Q1’25; watch for further normalization .

Estimates Context

  • S&P Global consensus for Q1 2025: Revenue $1.133B (10 est.) and EPS $0.94 (12 est.) vs actual $1.153B and $0.85; revenue beat and EPS miss likely driven by the $0.10 fraud charge and outsized insurance/claims . Values retrieved from S&P Global*.
  • Next quarter (Q2 2025) consensus at the time: Revenue $1.208B* (13 est.) and EPS $1.17* (10 est.). Management commentary implies sub-seasonal loads and typical 30–40 bps VC margin compression, suggesting estimates may need to account for lower-than-normal seasonal volume uplift and SG&A items (agent convention) .

Values with an asterisk (*) are retrieved from S&P Global.

Key Takeaways for Investors

  • Core operations resilient, but profits were pressured by a discrete forwarding fraud charge and unusually high insurance/claims; both should abate relative to Q1, though insurance remains an industry-wide risk to monitor .
  • Heavy Haul continues to outperform and is structurally supported (specialized skill, agent focus, tech for rating/routing); expect mix to aid rate quality and VC margin over time .
  • Tariff uncertainty is muting cross-border flows (notably U.S.–Mexico), but any enforcement of English proficiency could tighten industry capacity—historically a positive setup for Landstar’s spot-oriented model .
  • April/early May trends indicate modest YoY stabilization (loads slightly down to flat; RPL slightly up); however, management frames Q2 as below normal seasonality for volumes and modest VC margin compression .
  • Balance sheet and cash generation enable continued capital returns (dividend raised 11%, opportunistic buybacks) while funding tech and trailer refresh investments through the cycle .
  • For near-term positioning: results should be more sensitive to insurance/claims normalization and capacity tightening catalysts than to broad demand acceleration; Heavy Haul and platform mix are incremental offsets in a choppy macro .
  • Watch for updates on fraud recovery/professional fees and potential cargo theft mitigation benefits flowing through insurance costs in coming quarters .