Landstar (LSTR)

Freight delivery company Landstar (NASDAQ:LSTR) met Wall Street’s revenue expectations in Q3 CY2025, but sales fell by 1% year on year to $1.21 billion. Its non-GAAP profit of $1.22 per share was in line with analysts’ consensus estimates.

Company Overview

Covering billions of miles throughout North America, Landstar (NASDAQ:LSTR) is a transportation company specializing in freight and last-mile delivery services.

The growth of e-commerce and global trade continues to drive demand for shipping services, especially last-mile delivery, presenting opportunities for ground transportation companies. The industry continues to invest in data, analytics, and autonomous fleets to optimize efficiency and find the most cost-effective routes. Despite the essential services this industry provides, ground transportation companies are still at the whim of economic cycles. Consumer spending, for example, can greatly impact the demand for these companies’ offerings while fuel costs can influence profit margins.

Competitors offering similar products include J.B. Hunt (NASDAQ:JBHT), Old Dominion (NASDAQ:ODFL), and Knight-Swift Transportation (NYSE:SWFT).

Examining a company’s long-term performance can provide clues about its quality. Any business can experience short-term success, but top-performing ones enjoy sustained growth for years. Regrettably, Landstar’s sales grew at a tepid 4.5% compounded annual growth rate over the last five years. This fell short of our benchmark for the industrials sector and is a tough starting point for our analysis.

Long-term growth is the most important, but within industrials, a half-decade historical view may miss new industry trends or demand cycles. Landstar’s performance shows it grew in the past but relinquished its gains over the last two years, as its revenue fell by 9% annually. Landstar isn’t alone in its struggles as the Ground Transportation industry experienced a cyclical downturn, with many similar businesses observing lower sales at this time.

We can dig further into the company’s revenue dynamics by analyzing its most important segments, Van Equipment and Platform Equipment, which are 48.4% and 32% of revenue. Over the last two years, Landstar’s Van Equipment revenue (full truckload van transportation) averaged 10.5% year-on-year declines while its Platform Equipment revenue (full truckload trailer transportation) averaged 2.4% declines.

This quarter, Landstar reported a rather uninspiring 1% year-on-year revenue decline to $1.21 billion of revenue, in line with Wall Street’s estimates.

Looking ahead, sell-side analysts expect revenue to grow 5.1% over the next 12 months. While this projection indicates its newer products and services will spur better top-line performance, it is still below the sector average.

All else equal, we prefer higher gross margins because they make it easier to generate more operating profits and indicate that a company commands pricing power by offering more differentiated products.

Landstar has bad unit economics for an industrials business, signaling it operates in a competitive market. As you can see below, it averaged a 19.9% gross margin over the last five years. Said differently, Landstar had to pay a chunky $80.09 to its suppliers for every $100 in revenue.

Landstar’s gross profit margin came in at 9.2% this quarter, down 10.8 percentage points year on year. Landstar’s full-year margin has also been trending down over the past 12 months, decreasing by 3.6 percentage points. If this move continues, it could suggest a more competitive environment with some pressure to lower prices and higher input costs (such as raw materials and manufacturing expenses).

Operating margin is one of the best measures of profitability because it tells us how much money a company takes home after procuring and manufacturing its products, marketing and selling those products, and most importantly, keeping them relevant through research and development.

Landstar was profitable over the last five years but held back by its large cost base. Its average operating margin of 6.5% was weak for an industrials business. This result isn’t too surprising given its low gross margin as a starting point.

Looking at the trend in its profitability, Landstar’s operating margin decreased by 3.7 percentage points over the last five years. This raises questions about the company’s expense base because its revenue growth should have given it leverage on its fixed costs, resulting in better economies of scale and profitability. We’ve noticed many Ground Transportation companies also saw their margins fall (along with revenue, as mentioned above) because the cycle turned in the wrong direction, but Landstar’s performance was poor no matter how you look at it. It shows that costs were rising and it couldn’t pass them onto its customers.

This quarter, Landstar generated an operating margin profit margin of 2.2%, down 3 percentage points year on year. Since Landstar’s gross margin decreased more than its operating margin, we can assume its recent inefficiencies were driven more by weaker leverage on its cost of sales rather than increased marketing, R&D, and administrative overhead expenses.

We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.

Landstar’s flat EPS over the last five years was below its 4.5% annualized revenue growth. This tells us the company became less profitable on a per-share basis as it expanded due to non-fundamental factors such as interest expenses and taxes.

Diving into the nuances of Landstar’s earnings can give us a better understanding of its performance. As we mentioned earlier, Landstar’s operating margin declined by 3.7 percentage points over the last five years. This was the most relevant factor (aside from the revenue impact) behind its lower earnings; interest expenses and taxes can also affect EPS but don’t tell us as much about a company’s fundamentals.

Like with revenue, we analyze EPS over a shorter period to see if we are missing a change in the business.

For Landstar, its two-year annual EPS declines of 25% show its recent history was to blame for its underperformance over the last five years. These results were bad no matter how you slice the data.

In Q3, Landstar reported adjusted EPS of $1.22, down from $1.41 in the same quarter last year. This print was close to analysts’ estimates. Over the next 12 months, Wall Street expects Landstar’s full-year EPS of $4.68 to grow 18.2%.

If you’ve followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can’t use accounting profits to pay the bills.

Landstar has shown mediocre cash profitability over the last five years, giving the company limited opportunities to return capital to shareholders. Its free cash flow margin averaged 5.6%, subpar for an industrials business.

EPS and free cash flow tell us whether a company was profitable while growing its revenue. But was it capital-efficient? A company’s ROIC explains this by showing how much operating profit it makes compared to the money it has raised (debt and equity).

Although Landstar hasn’t been the highest-quality company lately because of its poor bottom-line (EPS) performance, it found a few growth initiatives in the past that worked out wonderfully. Its five-year average ROIC was 42%, splendid for an industrials business.

We like to invest in businesses with high returns, but the trend in a company’s ROIC is what often surprises the market and moves the stock price. Unfortunately, Landstar’s ROIC has decreased significantly over the last few years. We like what management has done in the past, but its declining returns are perhaps a symptom of fewer profitable growth opportunities.

One of the best ways to mitigate bankruptcy risk is to hold more cash than debt.

Landstar is a profitable, well-capitalized company with $434.4 million of cash and $77.13 million of debt on its balance sheet. This $357.3 million net cash position is 8.3% of its market cap and gives it the freedom to borrow money, return capital to shareholders, or invest in growth initiatives. Leverage is not an issue here.

Revenue and EPS were in line with expectations. This quarter didn't have many resounding positives or negatives. The stock traded down 1% to $127.99 immediately after reporting.

Updated: December 3, 2025 at 10:45 PM EST

A common mistake we notice when investors are deciding whether to buy a stock or not is that they simply look at the latest earnings results. Business quality and valuation matter more, so we urge you to understand these dynamics as well.

We cheer for all companies making their customers lives easier, but in the case of Landstar, we’ll be cheering from the sidelines. To begin with, its revenue growth was uninspiring over the last five years, and analysts expect its demand to deteriorate over the next 12 months. And while its stellar ROIC suggests it has been a well-run company historically, the downside is its diminishing returns show management's prior bets haven't worked out. On top of that, its weak EPS growth over the last five years shows it’s failed to produce meaningful profits for shareholders.

Landstar’s P/E ratio based on the next 12 months is 25.8x. This valuation tells us a lot of optimism is priced in - you can find more timely opportunities elsewhere.

Wall Street analysts have a consensus one-year price target of $131 on the company (compared to the current share price of $138.92), implying they don’t see much short-term potential in Landstar.