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LANDSTAR SYSTEM INC (LSTR)·Q2 2025 Earnings Summary

Executive Summary

  • Revenue $1.211B and diluted EPS $1.20; both modestly above Wall Street consensus, driven by 3.2% sequential increase in truck revenue per load and strength in unsided/platform and heavy haul *.
  • Variable contribution margin compressed to 14.1% (vs. 14.3% YoY); gross profit margin 9.0% (vs. 9.8% YoY) on higher insurance/claims severity and slightly lower brokerage net revenue margins .
  • Heavy haul revenue ~$138M, +9% YoY on +5% revenue per load and +4% volume; management views industrial/data center/power-related freight as bright spots .
  • Q3 outlook: no formal guidance; July loads ~+1% YoY and revenue per load ~−3% YoY; SG&A expected to decline ~$3M sequentially with a ~$1.5M offset from All-Star celebration; note potential legal verdict risk in Q3 .
  • Capital returns: $42.4M buybacks in Q2 and $0.40 quarterly dividend declared; strong balance sheet with ~$426M cash/short-term investments; TTM ROE 17% and ROIC 16% .

What Went Well and What Went Wrong

What Went Well

  • Heavy haul momentum: ~$138M revenue (+9% YoY) on +5% revenue per load and +4% volume; CEO: “extremely pleased with the performance of Landstar’s heavy haul service offering” .
  • Pricing resilience: truck revenue per load +2.6% YoY and +3.2% QoQ, with unsided/platform outperforming typical seasonality; CFO cited steady monthly rate progression across Q2 .
  • BCO stability: net BCO truck count “essentially flat” sequentially—the best since Q2 2022—supporting network utilization and service continuity .

What Went Wrong

  • Margin compression: variable contribution margin 14.1% (−20 bps YoY) and gross margin 9.0% (−80 bps YoY) on higher rate paid to brokerage carriers and insurance/claims severity .
  • Insurance/claims elevated: Q2 insurance and claims costs $30.4M (6.6% of BCO revenue vs. 5.8% prior year), driven by trucking accident severity, strategic cargo theft, and unfavorable prior-year claim development .
  • Cross-border headwinds and forwarding: U.S.-Mexico and U.S.-Canada underperformed domestic; ocean/air revenue per shipment and volumes declined sequentially from prior strength, pressured by tariffs and rate normalization .

Financial Results

MetricQ2 2024Q4 2024Q1 2025Q2 2025
Revenue ($USD Millions)$1,225.0 $1,209.3 $1,152.5 $1,211.4
Diluted EPS ($)$1.48 $1.31 $0.85 $1.20
Operating Income ($USD Millions)$68.1 $57.8 $39.4 $56.3
Gross Profit ($USD Millions)$120.0 $109.4 $98.3 $109.3
Gross Profit Margin (%)9.8% 9.0% 8.5% 9.0%
Variable Contribution ($USD Millions)$175.1 $166.5 $161.3 $170.5
Variable Contribution Margin (%)14.3% 13.8% 14.0% 14.1%

Segment revenue breakdown (service type):

Segment ($USD Millions)Q2 2024Q2 2025
Van truckload$618.9 $591.3
Unsided/Platform truckload$381.0 $400.9
Other truck transportation (power-only, expedited, etc.)$77.7 $100.7
Rail intermodal$22.3 $22.0
Ocean and air cargo$71.3 $50.8
Other (insurance segment, intra-Mexico)$25.7 $20.4

Operational KPIs:

KPIQ2 2024Q2 2025
Total truck transportation loads (000s)507.9 500.5
Total truck revenue per load ($)$2,177 $2,234
BCO loads (000s)213.6 203.9
BCO revenue per load ($)$2,180 $2,263
BCO independent contractors (count)8,385 7,844
Approved & active truck brokerage carriers (count)45,382 41,842

Balance sheet and cash flow (selected):

MetricQ2 2025
Cash & short‑term investments ($USD Millions)~$426
Cash from operations YTD ($USD Millions)$62.8
Capital expenditures YTD ($USD Millions)$4.4
Free cash flow YTD ($USD Millions)$58.4
Share repurchases YTD ($USD Millions)$102.3
Dividends paid YTD ($USD Millions)$97.2
TTM ROE / ROIC (%)17% / 16%

Guidance Changes

MetricPeriodPrevious GuidanceCurrent Guidance/CommentaryChange
RevenueQ1 2025$1.075–$1.175B Actual $1.153B N/A (reported)
EPSQ1 2025$1.05–$1.25 Actual $0.85 (includes $0.10 fraud charge) N/A (reported)
Insurance & claims (% of BCO revenue)Q1 2025~6.0% Actual ~9.3% Higher than guided
Effective tax rateQ1 2025~24.5% Actual ~24.7% Slightly higher
Variable contribution marginQ2→Q3Typical flat sequential Company expects VC margin ~flat from Q2→Q3 Maintained commentary
SG&AQ3 2025—Expected −$3M sequential tailwind post convention; partially offset by ~$1.5M All‑Star headwind New commentary
Near-term activityJuly 2025—Truck loads ~+1% YoY; revenue per load ~−3% YoY New commentary
Legal matterQ3 2025—Trial underway; potential substantial verdict risk in Q3; rights to appeal reserved New commentary
DividendQ2 2025—$0.40 per share declared; payable Sept 9, 2025 Announced

Earnings Call Themes & Trends

TopicQ4 2024 (Q-2)Q1 2025 (Q-1)Q2 2025 (Current)Trend
Heavy haul strengthRecord FY heavy haul; Q4 heavy haul rev +24% YoY +6% YoY heavy haul revenue in Q1 ~+$138M in Q2, +9% YoY; continued outperformance Strengthening
Pricing & seasonalityQ4 truck rev/load +3.1% YoY; sequential +1% Q1 seq −4.6% vs typical −3% Q2 truck rev/load +2.6% YoY; +3.2% QoQ; July −3% YoY Mixed, improving then moderating
Insurance/claimsElevated; cargo theft/fraud pressures Highly elevated at 9.3% of BCO rev Continued severity; Q2 costs up, VC margin compressed Persistently elevated
Cross-border & tariffsCross-border exposure detailed; cautious outlook U.S.-Mexico −9% YoY early Q2; tariff uncertainty noted Underperformed domestic; tariff/policy uncertainty persists Headwind persists
Capacity & ELP enforcementBCO declines moderating; asset-light flexibility Discussion of English proficiency (ELP) and potential capacity tightening Early ELP enforcement data; potential regional impacts (e.g., border states) Watch for tightening
Fraud mitigation & tech—Forwarding fraud charge ($4.8M); new fraud department, tech investments Carrier vetting tightened; active carriers reduced; ongoing tech defenses Building defenses
Data centers/power—Electrical category strength; strategic focus Management positive on data center/power infrastructure build Positive tailwind

Management Commentary

  • CEO: “Our second quarter revenue per truckload outperformed pre‑pandemic typical seasonality…net BCO truck count remained essentially flat sequentially, the best performance we’ve seen since the second quarter of 2022.” .
  • CFO: “Unsided platform revenue per load stepped up ~7% sequentially…impressive each month in the quarter.” .
  • CEO on market balance: “Sequential truck revenue per load improvement coupled with compression of brokerage net margins would indicate a market working its way back toward balanced.” .
  • CFO on insurance/claims: “Costs were $30.4M in Q2…increase due to accident severity, strategic cargo theft, and unfavorable prior year claim development.” .
  • CEO on Q3 approach: “Providing revenue commentary rather than formal guidance…July loads ~+1% YoY; revenue per load ~−3% YoY; SG&A −$3M seq tailwind partly offset by ~$1.5M headwind.” .

Q&A Highlights

  • SG&A/geography: Q2 included $4.8M P&L reclassification from SG&A to other operating costs; for Q3, view SG&A off the “pre‑reclass” baseline, then apply the −$3M tailwind .
  • Capacity vetting: Active brokerage carriers reduced due to enhanced fraud screening; more selective partnerships to improve quality .
  • Heavy haul drivers: Broad-based strength across wind, machinery, electrical, data centers; bullish medium‑term outlook even amid policy shifts .
  • ELP enforcement: Early days; potential to tighten capacity, especially near borders; Landstar BCOs largely insulated due to stringent standards .
  • Substitute line haul: Less diversified end market; demand varies with parcel/LTL customers; modest peak expectations this year .

Estimates Context

Results versus S&P Global consensus:

MetricQ2 2024Q4 2024Q1 2025Q2 2025
Consensus Revenue ($USD)$1,251.0M*$1,198.99M*$1,133.16M*$1,207.66M*
Actual Revenue ($USD)$1,225.0M $1,209.3M $1,152.5M $1,211.4M
Consensus EPS ($)$1.4529*$1.3419*$0.9406*$1.1723*
Actual EPS ($)$1.48 $1.31 $0.85 $1.20
  • Q2 2025: modest beats on both revenue and EPS versus consensus; strength in unsided/platform and heavy haul offset lower non‑truck modes and margin pressures .
  • Q1 2025: revenue in top half of guided range but EPS below prior guidance due to elevated insurance and the $4.8M forwarding fraud charge .
  • Q4 2024: revenue slightly above consensus; EPS modestly below on margin and claims pressure .
    Values marked with an asterisk are retrieved from S&P Global.

Key Takeaways for Investors

  • Mixed but improving pricing backdrop: sequential truck revenue per load outperformed seasonality; monitor July/August rate trajectory to gauge VC margin stability into Q3 .
  • Heavy haul and platform are the core growth engines, tied to data center/power and industrial projects; these segments underpin the medium‑term thesis even in choppy macro .
  • Margin recovery lever is two‑fold: brokerage spread behavior as rates evolve and insurance/claims normalization; watch claim severity and prior period development in coming quarters .
  • Fraud defenses and carrier vetting should reduce risk and improve quality mix; near‑term effect is fewer active carriers but better network integrity .
  • Border/regulatory watch: tariff path and ELP enforcement could tighten capacity regionally, benefiting pricing; conversely, cross‑border demand remains a swing factor .
  • Strong balance sheet enables continued buybacks/dividends through the cycle; Q2 buybacks and dividend reaffirm capital return discipline .
  • Near-term trading: modest Q2 beat, constructive pricing signals, and Q3 SG&A tailwind are positives; legal case outcome and July rate softness are overhangs to monitor .