Asset-light trucking and related services provider Landstar System Inc. (NASDAQ: LSTR) reported a 20% second quarter decline in earnings due to lower revenue and a big insurance claim.
The Florida company reported net income of $32.3 million, or 76 cents per share, down from $40.5 million a year earlier, or 92 cents per share. The earnings per share was less than a consensus estimate of 82 cents from analysts and below updated guidance issued by Landstar in early June. Back in April it was expecting second-quarter earnings of 80 cents to 85 cents per share.
“Net income was negatively impacted by elevated insurance and claims costs, driven mostly by the severity of claims ... the highest quarterly insurance and claims cost over the past six years,” the company said in a statement. It did not elaborate about the claim
Total revenue during the second quarter fell to $775.2 million from $868.4 million, in line with the company’s June expectations. Truck transportation revenue hauled by independent contractor drivers and truck brokerage carriers during the quarter was $718.5 million, compared to $809.2 million in the 2015 second quarter.
Landstar’s truckload transportation revenue hauled by van was $458 million, down from $496.9 million a year earlier. During the same time, truckload transportation revenue hauled via unsided/platform equipment fell to $242 million from $291 million. Revenue from freight hauled by rail, air and ocean cargo carriers was $45.1 million, compared to $48.1 million, in the 2015 second quarter.
"Overall, from a revenue standpoint, I believe we executed well considering the sluggish freight environment," said Landstar President and CEO Jim Gattoni. He pointed out that comparisons to last year's second quarter are thrown off because of more than 13,000 truckloads on platform trailers hauled for a project for a single automotive customer that was resposible for $27 million in revenue last year. "Excluding the loadings related to that project, we experienced a slight increase in loads hauled via truck over the 2015 second quarter.”
He said 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,” Gattoni said. “Additionally, the average cost of a gallon of diesel fuel was approximately 20% 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.”
The result: Revenue per load on freight hauled via truck was 9% lower in the 2016 second quarter compared to the 2015 second quarter.
Looking at the current third quarter of the year, Landstar said it is experiencing the normal seasonal uptick in revenue per load on loads hauled via truck and expects revenue for the period to be similar to second quarter revenue.
Landstar also announced on Wednesday that its board of directors has declared a quarterly dividend of 9 cents per share, 12.5% higher that it was in each of the previous four quarters.