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Jax Daily Record Monday, Apr. 16, 201806:20 AM EST

Analyst sees more Landstar gains

Projections mixed as one analyst forecasts 23 percent rise in stock price.
by: Mark Basch Contributing Writer

Landstar System Inc.’s stock has moved little over the past two weeks, despite the Jacksonville-based trucking company’s report that first-quarter earnings will be better than it originally forecast.

But at least one analyst expects the stock to rise.

Goldman Sachs analyst Matt Reustle last week initiated coverage of Landstar with a “buy” rating, citing its “superior business model.”

Landstar’s “asset light” business model involves contracting with drivers who own their own trucks through a series of agents across the country to haul freight.

“Within our coverage universe, asset-light operators are positioned to show the highest returns while taking on the least risk over the longer term,” Reustle said in his report on the transportation industry.

“With a track record of opportunistic shareholder returns, we view Landstar as an attractive business to own for the longer term,” he said.

Cowen analyst Jason Seidl raised his price target for Landstar last week from $115 to $118, but maintained a “market perform” rating on the stock.

Seidl saw a positive atmosphere at Landstar’s annual meeting of sales agents two weeks ago, when the company issued its updated earnings forecast.

“The Landstar convention was filled with bullish salespeople coming off what was likely the best year many of them have ever had. The tone was very positive on the 2018 outlook as well, consistent with what management said in its first-quarter preannouncement,” Seidl said in his research note on Landstar.

“The company consistently generates a notably high return on invested capital and high return on equity, rendering its shares attractive for long-term investors, but due to current valuation we would remain on the sidelines,” he said.

Morgan Stanley analyst Ravi Shanker is less optimistic about Landstar’s stock, with an “underweight” rating and a $96 price target.

“We believe the upside is more than priced in at Landstar given higher relative valuation vs peers, which keeps us underweight,” Shanker said in an earnings preview on the transportation industry.

CSX kicks off earnings season

Shanker also has an “underweight” rating on CSX Corp., before the railroad company kicks off earnings season for Jacksonville companies with its first-quarter report Tuesday.

“We believe the current backdrop for CSX’s turnaround is difficult as several key end markets face cyclical and secular threats (auto, coal, intermodal), pricing gains are decelerating, low-hanging cost opportunities may have already been taken and shipper scrutiny and investor expectations are high,” Shanker said in his report.

He anticipates “an uncharacteristically quiet quarter at CSX” while he expects to “keep an eye on real estate gains” in the company’s report.

In a follow-up note, Shanker said CSX during the first quarter sold its stake in a Savannah hotel property for $77 million and also filed plans to sell 175 miles of rail lines in Georgia and Alabama for an undisclosed price. He said investors should take note of those gains in evaluating CSX’s earnings.

“We continue to believe that gains from real estate/rail line sales and ancillary opportunities are less ‘core’ to railroading than carload/pricing growth and operational cost reduction,” he said.


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