Texas court orders Landstar to cover full $23 million accident judgment

Landstar System Faces Increased Insurance Costs and Legal Setbacks

Landstar System, a freight brokerage, has reported a significant rise in insurance and claims expenses in advance of its latest quarterly earnings announcement. According to a recent filing with the Securities and Exchange Commission on Wednesday, the company incurred $22 million in insurance-related charges during the most recent quarter.

The document highlighted that total insurance and claims costs reached $56 million, which included $22 million (equivalent to 49 cents per share) attributed to unfavorable claims developments.

Among these charges, $11 million (24 cents per share) stemmed from two separate serious vehicle accidents that took place in the fourth quarter. Following an actuarial assessment, Landstar is also increasing its self-insured reserves by $5.3 million (12 cents per share).

Additionally, Landstar reported a negative outcome in a Texas court case.

On August 6, a Texas jury determined that Landstar Ranger acted as a broker, not a carrier, in a 2021 vehicle accident involving Eduardo Cabral. The jury assigned $3.42 million in damages to Landstar, representing 15% of the $22.8 million total damages, while the remaining 85% was attributed to MyUniverse, the carrier involved in the incident.

However, a court judgment issued on January 13 now holds Landstar responsible for the entire amount of damages plus pre-judgment interest. As a result, Landstar has recorded an additional $5.7 million charge (13 cents per share) related to this case.

The company stated, “Landstar plans to vigorously challenge the Cabral case and the associated judgment, but there is no guarantee regarding the outcome or the success of any appeals.”

Landstar also recognized $2.1 million (5 cents per share) in noncash impairment charges connected to the sale of its Mexican subsidiary, Landstar Metro.

Financial Outlook and Performance

Landstar (NASDAQ: LSTR) now anticipates fourth-quarter earnings per share to be just 70 cents, which is significantly lower than the previous consensus estimate of $1.22 and last year’s EPS of $1.31 for the same period. The consensus EPS estimate has since been revised to $1.04.

Operating income for the quarter is projected to be $30 million.

Fourth-quarter revenue is expected to reach $1.17 billion, slightly under the $1.18 billion consensus and below the $1.21 billion reported a year earlier. The company attributed the revenue decline to a 1% year-over-year drop in truck loads, partially offset by a 1% rise in revenue per load. While flatbed loads and yields showed resilience, weaker trends in dry van freight offset these gains.

Additional Updates

From October to December, revenue per truck load increased by 6%, driven by supply-related factors affecting truck capacity in the market.

Landstar is scheduled to release its fourth-quarter financial results after the market closes on January 28.

As of 10:18 a.m. EST on Thursday, Landstar’s shares had declined by 1.7%, while the S&P 500 was up 0.4%.