3/11/25
Landstar System, Inc. is a well-established player in the freight transportation and logistics industry. The company operates under an asset-light model, meaning it doesn’t own a large fleet of trucks but instead relies on independent agents and third-party carriers to move freight efficiently. This model gives Landstar flexibility in changing economic conditions, allowing it to scale up or down as needed.
While the company’s earnings can be influenced by broader market cycles, its disciplined approach to financial management has made it a reliable performer over time. For dividend investors, Landstar may not be a high-yielding stock, but it offers consistent payouts backed by strong cash flows and a conservative balance sheet.
Key Dividend Metrics
📌 Dividend Yield: 0.90%
💰 Annual Dividend: $1.44 per share
📈 5-Year Average Yield: 0.65%
🔄 Dividend Growth Rate (5-Year): Strong, consistently increasing
🛡️ Payout Ratio: 25.05% (Plenty of room for future hikes)
📆 Ex-Dividend Date: February 18, 2025
📅 Next Dividend Payment: March 11, 2025
Dividend Overview
For investors looking for stable and growing dividends, Landstar presents an interesting case. The company’s dividend yield sits at 0.90%, which may not stand out in a world of high-yielding stocks, but it’s important to look beyond just the yield. The real strength here is in its ability to grow dividends over time while maintaining a conservative payout ratio.
With a payout ratio of just 25.05%, Landstar is distributing only a small fraction of its earnings to shareholders. This provides plenty of breathing room to continue raising dividends in the future, even if economic conditions become more challenging. The company has steadily increased its dividend over the years, and with strong cash flow generation, there’s no reason to believe that will change anytime soon.
Dividend Growth and Safety
One of the most attractive aspects of Landstar’s dividend is its growth potential. The company isn’t stretching its finances to pay dividends, which means there’s still room to increase payouts as earnings grow. Over the past five years, Landstar has steadily raised its dividend, and with a payout ratio well below 50%, future increases should be sustainable.
Another factor working in its favor is cash flow. Over the last twelve months, Landstar generated $286.56 million in operating cash flow and had $235.23 million in free cash flow. That kind of cash flow gives the company flexibility to reward shareholders while still reinvesting in its business.
Debt levels are another important consideration for dividend safety, and this is an area where Landstar stands out. The company has $566.64 million in cash on hand and only $164.4 million in total debt. A debt-to-equity ratio of just 16.91% is well below many of its peers, which adds another layer of security for investors.
Chart Analysis
Price Trend and Moving Averages
The stock has been in a clear downtrend over the past several months. This is evident in the price consistently trading below both the 50-day and 200-day moving averages. The 50-day moving average has been sloping downward for a while, which signals that short-term momentum remains weak. More importantly, the 200-day moving average is also trending lower, reinforcing that the broader trend is bearish.
There was a period of sideways movement followed by a sharper decline, with the stock attempting to stabilize near the current level. However, there’s still no clear sign of a reversal, as the price remains well below key resistance areas.
Recent Price Action
The last few trading sessions show some buying interest, as the stock bounced off recent lows. The most recent candles indicate price movement with long wicks, suggesting there is still some volatility. The stock opened at 161.82, reached a high of 164.35, but closed lower at 160.63. The presence of a lower wick on the last candle suggests that buyers attempted to push the price higher but were met with selling pressure before the close.
This type of action typically signals uncertainty. If the stock can hold above the recent lows, it might be forming a base, but if selling pressure persists, another leg lower could follow.
Volume and Market Participation
Volume has been fluctuating, but there have been noticeable spikes during certain down moves. Higher volume on red days indicates that sellers have been in control. The recent volume bar suggests some renewed interest, but it remains to be seen if this is the start of accumulation or just temporary buying before another decline.
If volume starts increasing alongside upward price movement, that could be an early signal of a potential trend reversal. For now, the stock hasn’t shown enough conviction from buyers to suggest a strong comeback.
Relative Strength Index (RSI)
The RSI is currently at a relatively low level, suggesting that the stock has been in oversold territory for a while. While this doesn’t necessarily mean an immediate bounce is coming, it does indicate that selling momentum may be slowing down. A push above 30 on the RSI could be an early sign that selling exhaustion is setting in, but for now, it remains in a weak position.
If the RSI continues to climb while the stock holds its recent levels, it could be an early indication that sentiment is shifting. However, if RSI remains low and price continues to drift downward, it would suggest continued weakness.
Analyst Ratings
📉 Downgrades
🔻 Raymond James downgraded Landstar System from Outperform to Market Perform on November 15, 2024. The analyst pointed to valuation concerns, suggesting that the stock had reached a level where further upside appeared limited. Additionally, there were indications that Landstar might not benefit from a broader industry recovery as quickly as expected, leading to a more neutral outlook.
🔻 Wolfe Research also lowered its rating to Peer Perform from Outperform on July 11, 2024. While no specific reasons were provided, the downgrade may signal a more cautious stance on transportation stocks, possibly due to the cyclical nature of the industry and concerns about freight demand.
📊 Price Target Adjustments
📈 UBS increased its price target for Landstar to 186 from 184 on October 30, 2024, while maintaining a Neutral rating. The slight increase suggests confidence in the company’s ability to navigate current conditions, though not enough conviction for a more bullish outlook.
📉 Morgan Stanley lowered its price target to 143 from 145 on October 7, 2024, while keeping an Equalweight rating. This minor adjustment could reflect concerns about short-term challenges, such as declining freight volumes or margin pressures that could impact profitability.
💰 Consensus Price Target
The average analyst price target for Landstar System is approximately 170.40, indicating some upside potential from current levels. Most analysts maintain a Hold rating, suggesting a balanced view where risks and opportunities are relatively even.
These updates show that analysts remain cautious on Landstar, recognizing its financial stability and long-term strengths while keeping an eye on industry headwinds and valuation considerations.
Earnings Report Summary
Landstar System’s latest earnings report reflects some ongoing challenges in the freight market, but the company continues to navigate through a tough environment with solid financial management.
For the fourth quarter of 2024, revenue came in at $1.209 billion, slightly up from $1.204 billion in the same quarter the previous year. However, earnings per share (EPS) dropped from $1.62 to $1.31, signaling some pressure on profitability. The biggest contributor to revenue was the company’s truck transportation segment, which brought in $1.085 billion—about 90% of total revenue. Compared to the prior year’s fourth quarter, truckload transportation revenue fell from $1.533 billion, reflecting the continued softness in the freight market.
Diving deeper into the numbers, revenue from van equipment shipments declined to $618.6 million, down from $869.8 million the year before. Similarly, revenue from unsided and platform equipment shipments came in at $339.9 million, compared to $423.4 million in the prior year. The power-only truck services segment also saw a sharp drop from $204 million to $99.7 million.
Outside of trucking, revenue from rail, air, and ocean cargo services totaled $88.6 million, down from $115.1 million. While these alternative shipping methods continue to make up a small portion of Landstar’s business, they weren’t immune to the broader freight slowdown.
Gross profit for the quarter stood at $124.6 million, a noticeable drop from $180 million in the same quarter last year. Meanwhile, variable contribution—essentially revenue after transportation costs and agent commissions—was $178.1 million, down from $234 million. These declines are largely tied to lower freight rates and reduced shipping volumes across the industry.
Landstar pointed to a weak U.S. manufacturing sector and a lackluster holiday shipping season as key factors weighing on demand. The trucking market also remains oversupplied, with too much available capacity keeping rates under pressure. Compared to the same quarter in 2022, the number of loads hauled by truck fell by 22%, while revenue per load dropped by 10%.
Despite these headwinds, Landstar remains financially strong. The company ended the year with about $541 million in cash and short-term investments. Operating cash flow for 2023 totaled $394 million, and return on equity for the trailing 12 months was a healthy 27%.
Looking ahead, management expects revenue in the first quarter of 2025 to land between $1.10 billion and $1.15 billion, with EPS projected between $1.25 and $1.35. While the freight market remains soft, Landstar continues to manage its business efficiently while waiting for industry conditions to improve.
Financial Health and Stability
Landstar is in a strong financial position, which is critical for dividend investors who want reliability. Since it doesn’t operate a large fleet of its own, the company avoids many of the capital-intensive costs that traditional trucking businesses face. This allows it to maintain high returns and avoid excessive debt.
Here’s a look at some key financial metrics:
- Profit margin: 4.05%
- Operating margin: 4.73%
- Return on assets: 8.55%
- Return on equity: 20.03%
A return on equity of 20.03% is particularly impressive, showing that the company is efficiently using its capital to generate profits. At the same time, a current ratio of 1.96 suggests Landstar has plenty of liquidity to cover short-term obligations.
One concern is that quarterly earnings declined by 20.30% year-over-year. That could be a sign of some margin pressure, which is worth monitoring. However, given the company’s strong financial foundation, this is unlikely to impact its ability to pay dividends in the near term.
Valuation and Stock Performance
Looking at valuation, Landstar’s stock is priced at a level that reflects both its strengths and the broader challenges in the freight industry.
- Trailing P/E ratio: 29.15
- Forward P/E ratio: 26.74
- PEG ratio: 5.34 (suggesting a premium valuation)
- Price/book ratio: 5.83
A forward P/E of 26.74 means the stock isn’t particularly cheap, especially given the earnings decline. The PEG ratio of 5.34 suggests that growth expectations may not fully justify the current valuation. However, with over 100% of shares held by institutions, it’s clear that Landstar remains a favorite among large investors.
Recent Stock Performance
Landstar has experienced some volatility, with a 52-week high of $196.86 and a low of $152.64. The stock has pulled back roughly 20% from its peak, which could present an opportunity for long-term investors.
The stock is currently trading below its 50-day moving average of $165.96 and its 200-day moving average of $179.13, indicating some near-term weakness. Whether this is a buying opportunity or a sign of further declines remains to be seen, but for dividend-focused investors, price dips can be a chance to lock in a slightly higher yield.
Risks and Considerations
Investing in Landstar comes with some risks, especially given its exposure to economic cycles.
- Cyclicality – The transportation industry is closely tied to economic activity. If demand for freight services declines, Landstar’s earnings could take a hit.
- Margin Pressures – Quarterly earnings have already declined by 20.30%, which could indicate pricing challenges. Higher fuel costs and inflationary pressures may also weigh on profitability.
- Valuation – A P/E ratio of 29.15 suggests that the stock is priced for growth, but if earnings don’t recover as expected, there could be downside risk.
- Competition and Regulation – The freight industry is highly competitive, with tight margins. Regulatory changes could also impact operations.
Final Thoughts
For dividend investors, Landstar offers a mix of reliability, growth, and financial strength. The company may not have the highest yield, but its commitment to increasing dividends over time makes it a strong option for those who prioritize steady, sustainable income.
With a low payout ratio, strong cash flow, and a conservative balance sheet, Landstar is well-positioned to continue rewarding shareholders. While economic conditions could lead to some near-term volatility, its asset-light model provides flexibility that many competitors lack.
For long-term investors looking for a financially disciplined company with consistent dividend growth, Landstar remains a name worth watching.
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