In one sense, Landstar (NASDAQ:LSTR) could be considered something of a pure play on trucking demand. Because of its structure and business model, Landstar is largely free of the operational worries such as fuel prices and driver retention that go with most trucking companies. Instead, as a shipping middleman, Landstar gets a little cut of the shipments it arranges. You can think of it more as a play on actual demand for trucking capacity.
Revenue motored ahead 12% for the second quarter, while net income came in nearly 34% ahead of last year's level. Not surprisingly, then, operating margins were strong -- up by more than 1 percent to 7.3% (from 6.1% in the year-ago quarter).
While revenue growth in the intermodal segment was a bit pokey (up 7%), that seems par for the course in that business, since the unit works on what seems to be an as-needed basis. In the core carrier group, revenue grew 13% as the company saw higher revenue per revenue mile, higher revenue per load, and a greater number of loads shipped through them in the quarter.
Although this company chooses for some reason not to present a cash flow statement, it did have sufficient resources to buy up about 1.4 million shares of stock.
Considering management guidance, it looks as though trucking demand should accelerate through the third quarter. While June has been a bit soft, management is apparently expecting growth in the third quarter (adjusting for hurricane-related revenue in the year-ago period) to be on par with that seen in the second quarter.
There's a lot to like about this business model. Landstar has nearly 28,000 capacity providers to choose from, which gives it a phenomenal virtual capacity without having to spend many capex dollars. Of course, this type of brokerage business is inherently low-margin and highly competitive, but a quick look at the double-digit return on assets and return on invested capital in excess of 30% shows that it can be quite profitable.
These shares don't look exceptionally cheap to me right now. What's more, there is a potential class-action suit against the company that could have broad ramifications for the business. So, as always, Fools pondering this one should do their own careful due diligence before hooking up with this shipping broker.
Haul away some more free Foolish insight:
Fool contributor Stephen Simpson has no financial interest in any stocks mentioned (that means he's neither long nor short the shares).
