Landstar Price Keeps On Trucking Higher

Landstar System (NASDAQ; LSTR) is a good example of transportation companies that have enjoyed growth in revenue, earnings and stock price as a result of the pandemic.

Its one-year return is 63.61%. That’s an important number, as it’s been a year since the first Covid lockdowns began, and people turned increasingly to online ordering. 

The stock closed Thursday at $166.41. That was a gain of $0.81, although it closed at the low end of its daily trading range. 

The Jacksonville, Florida company’s business is based on a system of independent agents who work directly with customers to find solutions for transporting goods, using the Landstar network of providers. 

On the road, it’s truck owner/operators who lease to Landstar, and choose which jobs they want to take. 

Landstar does not own tractors, just a trailer fleet. This helps it keep expenses manageable, relative to companies that own their entire fleets. 

Logistics and trucking companies have been busy with the uptick in online ordering over the past year. 

Landstar is a component of the Dow Jones Transportation Average, more colloquially known as the Dow Transports. 

Harbinger Of Things To Come?

This index, comprised of 20 domestic stocks from the airline, trucking, shipping, and related industries, can be a harbinger of economic strength or weakness. According to this theory, if more goods are being shipped, that indicates more money being spent. A downturn in shipping could signal consumers and businesses tightening their belts. 

The index has a one-year return of 89.57%. 

Analysts expect Landstar to report earnings of $6.59 per share this year, a 17% year-over-year gain. Next year, that number is forecast to be $6.93 per share, up 5%.

While the company has remained profitable for years, earnings growth was slowing in the pre-pandemic quarters. That turned around in the third quarter of 2020 when earnings growth resumed. 

Fourth-quarter earnings, reported on January 27, came in at $2.01 per share, up 58% from a year ago. That topped analysts’ consensus estimates. 

Revenue, too, was slowing before the pandemic, but picked up in the second half of 2020. In the fourth quarter, revenue was $1.297 billion, a 30% year-over-year increase. 

Durable goods, construction materials, and e-commerce deliveries were growth drivers in the quarter.

The trucking industry, as a whole, slowed down in 2019 and early 2020, so Landstar’s historical performance tracks that of its rivals. 

Analysts’ consensus rating is currently “hold.” The consensus price target is $133.17.

Goldman Sachs Downgrade

This month, Goldman Sachs cut Landstar’s rating from neutral to sell.

The analyst’s note explained that Goldman sees Landstar’s risk/reward equation as less favorable than that of its trucking industry peers. 

The stock notched gains in eight of the past 11 months. It started climbing out of the 2020 decline in mid-April. It cleared a cup-with-handle buy point of $117.61 in average volume on July 18.

Ideally, you want to see a stock break out of a price consolidation in heavier volume, which indicates strong institutional conviction. However, a breakout can sometimes work if volume picks up in the subsequent sessions, and that’s exactly what happened with Landstar. 

Holding Above 50-Day Average

The stock trended steadily higher over the next eight weeks, holding well above its 50-day moving average. 

It rallied to a high of $139.99 on September 10, before pulling back and forming a short cup-with-handle base, followed immediately by a flat base. It cleared that second buy point in mid-December, then bounced along its 50-day line until rallying to a new high of $158.91 on January 21.

From there, the stock rallied and retreated to its 50-day line, only to bounce back and run up even further in price. 

That 50-day rebound is an encouraging sign for Landstar investors, showing that institutions stepped in to shore up their positions. At this point, the stock is too extended to show a reasonable buy point, but another base or moving-average pullback could offer a more attractive entry.