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WIKI ANALYSIS
Landstar (LSTR) is a non-asset based trucking company - a trucking company that doesn't own its own trucks; it earns commissions by connecting self-employed truckers who own trucks with shipping customers.
Landstar's carrier segment, which coordinates full truckload transportation, accounted for 73% of revenue in 2007 and shipped over 1 million loads that year. The majority of the remaining revenue (26%) is earned by the global logistics segment.[1]
Landstar competes with other full truckload and less-than-truckload carriers, and in 2007, Landstar was the seventh largest less-than-truckload shipping carrier.[2][1] As the economy slows and the demand for freight transportation decreases, Landstar will be able to largely maintain its profit margin because the majority of its costs are variable costs associated with connecting its independent contractors to its shipping customers.[3]
Company Overview
Landstar System, Inc. is a transportation and logistics agent that earns commission-based revenue by connecting self employed truckers with shipping customers. Landstar System's independent sales agents coordinate the shipment of freight between customers in the United States, Canada and Mexico using their network of independent truck operators. Landstar System's operations can be divided in to three business segments: the carrier segment, the global logistics segment and the insurance segment.[1] The company ships forest products, paper & paper products, building materials, general merchandise, food & beverage, chemicals, and automotive parts.
Business and Financial Metrics
Financial Discussion: In 2007, Landstar reported revenues of $2.49 billion, which is down from revenues of $2.51 billion in 2006 and $2.52 billion in 2005; revenue decreased by 1.1% between 2006 and 2007.[1] In 2007, Landstar reported a net income of $110 million, which is down from $113 million in 2006 and $116 million in 2005.[1] The decreases in revenue and net income can be attributed to the global logistics segment, whose decreased revenue resulted from a decrease in revenue associated with that segment's contract to provide disaster relief transportation for the Federal Aviation Authority (FAA).[1]
2008 Q3: Through the third quarter of 2008, Landstar reported revenues of $2.04 billion, which is up from revenues of $1.84 billion for the same period in 2007.[4] Landstar reported a net income of $86.3 million for the first three quarters of 2008, which is up from a net income of $80.6 million for the same period in 2007.[5] The increase is primarily due to an increase in revenue created by intermodal transportation shipping and natural disaster evacuation bus services provided by the global logistics segment.[6]
Business Metrics: Landstar's management uses number of loads (volume), revenue per load, and revenue per mile to keep track of the company's internal operations. Revenue per load and revenue per mile each vary with the type of load that is being hauled and where that load is being hauled. Hauling more expensive cargo will create more revenue then less valuable cargo; furthermore, loads hauled into or out of densely populated areas create less revenue then loads hauled to remote areas.[7]
| Metrics | Carrier Segment | Global Logistics Segment | ||||
|---|---|---|---|---|---|---|
| Years | 2005 | 2006 | 2007 | 2005 | 2006 | 2007 |
| Number of Loads | 1,097,000 | 1,108,300 | 1,121,900 | 334,000 | 380,700 | 402,900 |
| Revenue per Load | $1,542 | $1,621 | $1,612 | $1,555 | $1,528 | $1,572 |
| Revenue per Mile | $1.92 | $2.02 | $2.04 | - | - | - |
Business Segments
Carrier Segment (73% of Revenue)[1]
The carrier segment facilitates the transportation of entire truckloads of cargo between shippers. The carrier segment consists of of 8,603 trucks owned and operated by independent contractors and 14,331 trailers owned by either independent contractors or Landstar System.[1] Revenue from the carrier segment increased by 0.7% from $1.80 billion to $1.81 billion, between 2006 and 2007.[1]
Global Logistics Segment (26% of Revenue)[1]
The global logistics segment arranges intermodal shipping; less-than-truckload shipping (LTL); contract logistics; truck brokerage; emergency and expedited ground, air, and ocean freight; bus brokerage; and warehousing. Excluding transportation associated with the FAA contract, the number of loads and revenue per load delivered by this segment increased by 6% and 3%, respectively, from 2006 to 2007.[1]
Insurance Segment (1% of Revenue)[1]
The insurance segment is made up of Signature Insurance Company, a fully owned subsidiary, and Risk Management Claim Services, Inc. This segment provides property and casualty insurance as well as risk and claims management services to Landstar's operating subsidiaries.[1]
Key Trends and Forces
Landstar can weather downturns more easily than its competitors because of its non-asset based structure
The demand for cargo transportation will decline as the full effects of the global recession negatively impact the manufacturing and retail segments. As the demand for cargo transportation and the capacity needed for cargo transportation decrease, Landstar will be able to maintain its current profit margin because of its non-asset based structure. Landstar's net profit margin in 2007 was 4.4% and payments to independent contractors and sales agents, which are a variable cost, made up 90% of Landstar's 2007 total costs.[1] Landstar's net profit margin through the third quarter of 2008 was 4.2% and payments to independent contractors and sales agents made up 91% of Landstar's total costs during the same period.[8]
Landstar pays its independent contractors a prior-negotiated, contractually agreed-upon rate for picking the cargo up and delivering it to its destination; this rate is usually a percentage of the revenue generated by the shipment. Landstar also pays its sales agents a contractually agreed upon rate that is a percentage of Landstar's total revenue or gross profit.[1] Since Landstar purchases capacity as it is needed, Landstar will never have to increase prices when capacity is scare nor will it have to decrease prices when capacity is abundant.[9]
Landstar is exposed to fluctuations in the price of oil
Landstar purchases its hauling capacity from independent trucking contractors who set prices for use of their capacity. Increases in the price of oil will increase the contractors' variable costs; if the contractors' variable costs increase they will pass this increase on to Landstar by increasing the price that Landstar pays for capacity. If Landstar cannot pass this increase on to its customers, either for competitive or strategic reasons, Landstar's net income will decrease.[1]
For the first three quarters of 2007 the average price of a gallon of diesel fuel was $2.75[10] and Landstar's payments to its independent contractors accounted for 81%[11] of its total costs. For the first three quarters of 2008 the average price of a gallon of diesel fuel was $4.09[12] and Landstar's payments to its independent contractors accounted for 83%[13] of its total costs.
Landstar System's profitability is not directly related to one customer
Landstar's top 100 customers accounted for about half of Landstar's revenue.[1] In 2007, contracts with the FAA to provide disaster relief services accounted for 17% of revenue; however, that contract expired December 31, 2007.[1] Since no one customer currently accounts for more than 10% of Landstar's revenue, the success of the company does not depend on serving one particular customer. This means that Landstar does not have to change its prices or modify its operations to accommodate one customer's demands the way freight companies that earn the majority of their revenue from one customer have to.
Competition
Landstar System, Inc. primarily provides full-truckload shipping, intermodal shipping, and logistics services; these are trucking companies that represent Landstar's competition because they provide similar services.
- C.H. Robinson Worldwide (CHRW). is a non-asset based trucking company with operations in United States, Canada, Europe, Mexico, South America and Asia[14] that had revenues of $7.3 billion and net income of $324 million.[15]
- J.B. Hunt Transport Services (JBHT) uses company owned trucks, independent contractors and third parties to provide intermodal, full-truckload and contracted freight transportation services to its customers. In 2007 J.B. Hunt had revenues of $3.49 billion and a net income of $213 million.[16]
- Knight Transportation (KNX) operates in two segments: an asset based, full-truckload shipping segment, which produces 60% of the company's revenue, and a non-asset based, truck brokerage segment that produces the remaining 40^% of the company's revenue. In 2007 Knight had $714 million in revenues and $63 million in net income.[17]
- Conway Inc (CNW) is a trucking company that provides shipping, logistics and supply chain management to its customers. In 2007 Conway had revenues of $4.39 billion and a net income of $146 million.[18]
Market Share
Landstar System competes in the Less-than-Truckload Shipping (LTL) segment of the freight transportation market. The following table shows 20 of the largest companies that compete in the less-than-truckload segment.
Comparing Truckload and Less-than-Truckload Companies[19]
| Company | Market Share | Sales (in $millions) | 1-Year Sales Growth | Tractors | Trailers | Terminals |
| Landstar System | 1.0% | $2,518.0 | -0.1% | 8,800 | 13,600 | N/A |
| YRC Worldwide | 3.9% | $9,918.7 | 13.5% | 17,500 | 64,200 | 670 |
| Con-Way Inc. | 1.7% | $4,221.5 | 1.2% | 7,800 | 30,500 | 440 |
| Schneider National | 1.4% | $3,700.0 | 5.7% | 14,400 | 48,000 | N/A |
| FedEx Freight | 1.4% | $3,645.0 | 13.3% | 14,000 | 45,000 | 470 |
| J.B. Hunt Transport Services (JBHT) | 1.3% | $3,328.0 | 6.4% | 11,100 | N/A | N/A |
| Swift Transportation | 1.2% | $3,172.8 | -0.8% | 18,000 | 50,000 | 30 |
| Werner Enterprises | 0.8% | $2,080.6 | 5.5% | 9,000 | 25,000 | N/A |
| Arkansas Best (ABFS) | 0.7% | $1,860.5 | 0.0% | 4,000 | 20,000 | 290 |
| Estes Express Lines | 0.6% | $1,447.2 | N/A | 6,500 | 22,800 | 185 |
| Old Dominion Freight Line | 0.5% | $1,279.4 | 20.5% | 4,600 | 17,900 | 180 |
| UPS Ground Freight | 0.4% | $1,014.1 | N/A | 6,800 | 22,800 | 210 |
| Averitt Express | 0.4% | $921.3 | N/A | 4,000 | 11,250 | 80 |
| Saia (SAIA) | 0.3% | $874.7 | -20.3% | 2,900 | 9,000 | 150 |
| Southeastern Freight Lines | 0.3% | $711.0 | 9.8% | N/A | N/A | N/A |
| DATS Trucking | 0.2% | $600.1 | N/A | 500 | 1,000 | N/A |
| AAA Cooper Transportation | 0.2% | $528.8 | N/A | 2,300 | 6,000 | 75 |
| Vitran Corporation | 0.2% | $514.1 | 20.1% | N/A | N/A | 125 |
| Koch Companies | 0.1% | $200.0 | N/A | 650 | 1,820 | N/A |
| NFI Industries | 0.1% | $187.2 | N/A | 3,000 | 8,000 | 50 |
| Central Freight Lines | 0.1% | $185.9 | N/A | 1,900 | 8,500 | 65 |
| A. Duie Pyle Inc. | 0.03% | $77.9 | N/A | 540 | 1,450 | 12 |
| TOTAL: | $40,251.6 | 125,490 | 377,820 | 2,592 | ||
References
- ↑ 1.00 1.01 1.02 1.03 1.04 1.05 1.06 1.07 1.08 1.09 1.10 1.11 1.12 1.13 1.14 1.15 1.16 1.17 1.18 1.19 LSTR 2007 10K
- ↑ Wikinvest - J.B. Hunt Transport Services
- ↑ Stock Market Beat
- ↑ LSTR 2008 Q3 10Q
- ↑ LSTR 2008 Q3 10Q
- ↑ LSTR 2008 Q3 10Q
- ↑ Transportation Business Associates
- ↑ LSTR 2008 Q3 10Q
- ↑ non-asset based&hl=en&ct=clnk&cd=1&gl=us&client=firefox-a Truckin'
- ↑ Energy Information Administration
- ↑ LSTR 2008 Q3 10Q
- ↑ Energy Information Administration
- ↑ LSTR 2008 Q3 10Q
- ↑ C.H. Robinson Worldwide
- ↑ Google Finance - CHRW
- ↑ JBHT 2007 10K
- ↑ KNX 2007 10K
- ↑ CNW 2007 10K
- ↑ Wikinvest - J.B. Hunt Transport Services
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