Morningstar | LSTR Updated Forecasts and Estimates from 06 May 2019
Landstar System ranks among the largest third-party logistics providers in the fragmented $72 billion-plus U.S. highway brokerage space. Since Landstar doesn't own tractors, only a fleet of trailers, it has lower operating leverage than pure asset-based truckers. Thus, it enjoys a variable-cost structure with relatively low capital intensity that generates solid returns on capital--around 30% over the past five years. Moreover, as one of the largest providers, Landstar has built a vast network of shippers, truckload carriers, and independent sales agents that support a wide economic moat, in our view. Landstar's trucking capacity is unusual for an asset-light broker because it relies in part on captive owner-operators (which the firm refers to as business capacity owners), in addition to unaffiliated third-party carriers, to haul freight. BCOs represent about half of revenue, haul exclusively for Landstar, and most operate fewer than five trucks. Worth noting is that the firm pays BCOs a fixed percentage of revenue, which reduces gross-margin variability relative to peers like C.H. Robinson and Echo Global Logistics. It also specializes in odd-size freight (about one third of sales represents unsided/flatbed business) and irregular routes--factors that provide incremental competitive differentiation. Additionally, rather than using a captive salesforce, Landstar contracts with a large network of independent, commission-based sales agents. Landstar's immense network of third-party truckers and owner-operators will remain valuable to shippers. This is particularly because truckload industry capacity is facing secular growth constraints due to the limited driver pool. Overall, we expect the freight brokerage market to grow at a faster clip than the combined for-hire trucking and intermodal markets, as large 3PLs continue to process more for-hire truckload and less-than-truckload freight.Landstar System is an asset-light provider of integrated transportation management solutions. The company provides services to its customers across transportation modes, throughout the U.S. and to a lesser extent in Canada and Mexico, and between the U.S. and Canada, Mexico and other countries around the world. The company has two segments: transportation logistics, which provides truck services, rail intermodal services, as well as air and ocean services; and insurance, which is comprised of Signature Insurance Company, an offshore insurance subsidiary, and Risk Management Claim Services, Inc. The company's insurance segment provides risk and claim management services to certain of its operating subsidiaries.
Morningstar, Inc. is a leading provider of independent investment research in North America, Europe, Australia, and Asia. The company offer an extensive line of products and services for individual investors, financial advisors, asset managers, and retirement plan providers and sponsors.
Morningstar provides data on approximately 530,000 investment offerings, including stocks, mutual funds, and similar vehicles, along with real-time global market data on more than 18 million equities, indexes, futures, options, commodities, and precious metals, in addition to foreign exchange and Treasury markets. Morningstar also offers investment management services through its investment advisory subsidiaries and had approximately $185 billion in assets under advisement and management as of June 30, 2016.
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