On April 2, 2025, Landstar System, Inc. (LSTR) issued updated first-quarter 2025 guidance, citing issues related to truckload volume, truck revenue per load, variable contribution and insurance and claims expenses. Additionally, a supply chain fraud case has come to light, which is likely to negatively impact LSTR’s earnings.

Given this backdrop, the question that naturally arises is: Should investors buy, hold, or sell LSTR stock now? A more in-depth analysis is needed to make that determination. Before diving into LSTR’s investment prospects, let’s take a glance at its financial numbers.

LSTR's Tweaked Q1 Guidance

Landstar lowered its first-quarter 2025 earnings per share guidance to the range of 90-95 cents from the previously guided range of $1.05-$1.25 per share. The downside can be attributed to the insurance and claims costs, which LSTR anticipates to be significantly elevated in the first quarter of 2025 due to the development of cargo theft and truck accident claims.

Additionally, during the last fiscal week of the first quarter of 2025, LSTR identified a supply chain fraud case that now remains under investigation and does not involve LSTR’s core North American truckload services. Despite being in the early stages of the investigation, LSTR expects this fraud case to hurt its first-quarter 2025 earnings per share in the range of 35 to 50 cents, primarily related to an impairment of a trade accounts receivable recorded on LSTR’s Dec. 28, 2024 balance sheet (before taking into account any potential insurance or other recoveries).

Coming to the top line part, LSTR now anticipates its first-quarter 2025 revenues to be at or near the mid-point of the previously guided range of $1.075-$1.175 billion. The company witnessed a stronger-than-typical February in terms of the number of loads hauled by truck. This performance more than offset the softness experienced on loads hauled via truck at the end of January, owing to severe winter weather across the country and the wildfires in California.

During the first eight weeks of the first quarter of 2025, LSTR witnessed a 4% year-over-year decline in the number of loads hauled via truck. The downside was owing to decreases of 6% and 5% in loads hauled via van equipment and unsided/platform equipment, respectively, partially offset by a 26% increase in other truck transportation loadings.

We would like to remind investors that LSTR is slated to release its first-quarter 2025 earnings results on April 29, 2025, after the market close.

LSTR Stock Price Plunges

LSTR’s disappointing price performance is not limited to post-first-quarter 2025 guidance revision.

Shares of Landstar stock have plunged 19.4% so far this year compared with the transportation-truck industry’s 9.9% decline. However, LSTR's price performance compares favorably with that of industry players such as J.B. Hunt Transport Services JBHT and Knight-Swift Transportation Holdings Inc. KNX within the same time frame.

LSTR Stock YTD Price Comparison

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Additionally, LSTR stock reached a new 52-week low of $137.49 in the trading session on April 3, 2025, before closing a tad higher at $138.63.

What Do Earnings Estimates Say for LSTR?

In the past 60 days, the Zacks Consensus Estimate for LSTR’s first-quarter and second-quarter 2025 earnings and full-year 2025 earnings have moved south.

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Valuation Picture for LSTR Stock

From a valuation perspective, LSTR has been trading at a premium compared with the industry.

The stock has a forward 12-month P/E-F12M of 22.09X compared with 20.13X for the industry over the past five years. The company’s forward 12-month P/E-F12M ratio is also above the median level of 21.75X over the past five years. These factors indicate that the stock’s valuation is unattractive.

LSTR P/E Ratio (Forward 12 Months) Vs. Industry

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LSTR has a Value Score of D.

Moreover, LSTR is expensive than other trucking stocks, such as J.B. Hunt Transport Services and Knight-Swift. J.B. Hunt Transport Services and Knight-Swift have forward 12-month P/E-F12M of 20.19X and 16.01X, respectively.

Time to Get Rid of LSTR

It is quite clear that LSTR stock is currently unattractively valued. Moreover, higher insurance and claims expenses and a supply chain fraud case are hurting its first-quarter 2025 earnings expectations. Reduced demand for freight services and increased truck capacity continue to hamper the company’s growth prospects. The tariff-related uncertainty further clouds LSTR’s outlook.

We believe that the negatives surrounding LSTR stock outweigh its efforts to develop its heavy haul services in addition to the cross-border transportation with Mexico, its solid balance sheet and consistent efforts in rewarding shareholders through dividend payments and share buybacks. So, the stock appears to be a risky bet for investors. The stock’s current Zacks Rank #5 (Strong Sell) justifies our analysis.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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