James Gattoni will have a tough act to follow as he succeeds Henry Gerkens as Landstar System Inc. chief executive officer, at least as far as stockholders are concerned.
Other than one dip during the last recession, the trucking company’s stock has been on a generally straight upward trend since it went public in 1993, and that strength has continued this year.
Excluding Fortegra Financial Corp., which agreed to a buyout in August, Landstar was the best performing stock among Jacksonville-based companies in the third quarter with a 12.8 percent gain, and was the best performer through the first nine months of this year with a 25.7 percent increase.
Landstar announced last week that Gattoni, the company’s longtime chief financial officer, will succeed Gerkens at the end of this year.
It was no surprise to anyone because Gattoni was promoted to the additional position of president in January, a signal that he was being groomed to succeed Gerkens. So nothing about the company’s strategy should change with a new CEO.
That’s good news for investors because they should be happy with the way Landstar does business.
“While it will be hard to fill Mr. Gerkens’ shoes, we have known Mr. Gattoni for a long time and believe he will be a quality leader for the company based on his
extensive knowledge of the organization and financial experience,” William Blair & Co. analyst Nate Brochmann said in a research note.
“It is probably too early to say whether Mr. Gattoni will bring with him any new strategic ideas, but we anticipate only tweaks to what has been a fairly successful growth strategy historically,” he said.
Gattoni told the Daily Record that Landstar is having one of the best years in its history, and the company seems assured of reaching its goal of $3 billion in revenue for the full year.
Another analyst also expressed optimism about Landstar’s prospects last week.
“We believe Landstar’s unique business model utilizing exclusive Business Capacity Owners (BCOs) is well positioned to outperform in a rising truckload rate environment. While BCOs represent only approximately half of Landstar truckload moves, it is nonetheless a unique aspect that is not used by other public brokers,” Wells Fargo analyst Casey Deak said in a report last week as he initiated coverage with an “outperform” rating on the stock.
The BCOs are drivers who own their own trucks. Landstar doesn’t own trucks itself. The company works with a series of agents around the country to match drivers with freight customers.
Landstar isn’t just outperforming other Jacksonville-based companies. Deak said Landstar is doing better than the Standard & Poor’s 500 index (up 6.7 percent through nine months) and the Dow Jones transportation index (up 14.2 percent). He expects the stock to continue rising.
“We believe Landstar’s unique model utilizing exclusive Landstar capacity should lead to outperformance over our 6-12 month investment horizon as truckload capacity remains tight and rates continue to rise,” Deak said.
He values the stock, which was trading at $72.19 when he issued his report Tuesday, at $80 to $82.
Deak’s report came a day before the CEO change was announced, but he said, “We also have grown more confident in management’s direction with the firm” as it focuses on its core business.
“Finally, in our view Landstar possesses nice leverage to an economic recovery with approximately 30 percent of revenues tied to flatbed/heavy-haul equipment,” he said.
Lackluster quarter for Jacksonville stocks
Aside from Landstar, it was a generally lackluster third quarter for Jacksonville stocks, not surprising in a three-month period when the S&P 500 edged up by only 0.6 percent.
Fortegra jumped nearly 30 percent after agreeing to the buyout by Tiptree Financial Inc., a deal the companies hope to close by the end of this year.
However, only four of the other 14 companies that have been trading all year registered gains for the quarter, and the biggest gain after Fortegra and Landstar was just a 4.1 percent increase for CSX Corp.
The biggest loser, not surprisingly, was Body Central Corp. The struggling retailer dropped 78.1 percent, even after a 1-for-10 reverse split that reduced the number of shares outstanding and raised the trading price of the stock.
Web.com Group Inc. also had a big drop, falling 30.9 percent after reporting lower-than-expected revenue in the second quarter.
That followed another big drop of the website services company in June, as investors worried that competition from Google will affect Web.com’s website domain registration business.
Web.com’s stock ended the third quarter down 47 percent from its March high of $37.72.
Boeing shifting some work to Jacksonville
The Boeing Co. last week announced that some additional work will be shifted to its Jacksonville facility at Cecil Airport as part of a realignment of its Defense, Space and Security unit.
The aerospace company said it is moving the majority of its defense services and support-related activities out of Washington state. The bulk of the work will be transferred to Oklahoma City and St. Louis, but the company said additional work also will be moved to Jacksonville and Patuxent River, Md.
Boeing spokeswoman Yvonne Johnson-Jones said by email that job additions for Jacksonville will be small, up to 25 positions, to support work on the Navy’s P-8 Poseidon aircraft.
Johnson-Jones said she couldn’t comment specifically on how many workers Boeing has in Jacksonville, but the company has about 1,300 workers in all of Florida.
Boeing said it could add about 900 jobs in Oklahoma City and up to 500 in St. Louis as part of its realignment, which could take up to three years to complete. It said about 2,000 employees will be affected by the moves.
Goldman Sachs says ‘sell’ FIS
Fidelity National Information Services Inc., or FIS, is without a doubt the leader in its field.
The Jacksonville-based company last week boasted that it ranked atop the FinTech 100 list for the fourth year in a row. That list compiled by IDC Financial Insights ranks the top technology providers to the financial services industry.
Despite its lofty ranking in the industry, Goldman Sachs analysts resumed coverage of FIS last week with a “sell” rating, as the firm took a new look at the entire outsourced technology services industry.
Goldman Sachs said in the report that it sees more downside for FIS than the other technology services firms it is covering.
“We believe FIS is well positioned with its core US bank outsourcing franchise, where we expect it to maintain or gain share. However, we expect the company’s growth to come mainly in its international segment which is significantly margin dilutive — and we think the stock’s premium multiple could come under pressure as a result,” the report said.
“We could become more positive on the stock if we see a rebound in the company’s high-margin payments segment, or if FIS can drive significant margin expansion in its international segment,” it said.
Goldman Sachs’ rating is an outlier, compared with the other analysts covering FIS. According to Thomson Financial, five analysts currently rate the company as a “strong buy,” four rate it as a “buy” and the other seven rate it at “hold.”
FIS makes two deals
As Goldman Sachs expressed its concerns about the company’s international expansion, FIS last week said it completed the $480 million acquisition of Clear2Pay, a Belgium-based provider of technology services for payment processing.
Separately, Atlanta-based Global Payments Inc. announced it agreed to buy gaming assets from FIS subsidiary Certegy Check Services Inc. for an undisclosed price. That business provides a suite of technology services to the gaming industry.
Robert W. Baird analyst David Koning said in a research note that he expects the sale to have an “immaterial impact” on FIS. He had previously estimated that the Clear2Pay acquisition will add 2 to 3 cents per share of earnings annually.
FIS is projected by analysts to earn $3.40 to $3.58 a share next year, according to Thomson.
MV Portfolios reports no revenue
Several new Jacksonville-based public companies have emerged this year and one of them, MV Portfolios Inc., filed its annual report with the Securities and Exchange Commission last week showing no revenue for the fiscal year ended June 30. It recorded a net loss of $4.9 million.
MV Portfolios owns a number of patents related to video drive-by and online mapping technology. The company in March filed a patent infringement lawsuit against Google Inc., alleging that Google Street View and Google Earth applications infringed on its patents.
MV Portfolios became public by merging with an existing public company and has been trading on the OTC Markets Inc. QB Tier under the ticker symbol “CLGLD.” The annual report says the company expects to trade under its new symbol, “MPVI,” this month.
(904) 356-2466