Landstar System says supply chain fraud may lower earnings

Landstar System says supply chain fraud may lower earnings (Courtesy of the Jacksonville Daily Record) — Landstar System Inc.’s first-quarter revenue met its expectations, but the Jacksonville-based trucking company said two factors may significantly reduce its earnings.

“During the last fiscal week of the Company’s first fiscal quarter of 2025, the Company identified a significant supply chain fraud that remains under investigation and does not involve the Company’s core North American truckload services,” Landstar said in an April 2 Securities and Exchange Commission filing.

“While preliminary in our investigation, the Company believes this fraud may adversely affect Landstar’s 2025 first quarter earnings per share in a range of $0.35 to $0.50 primarily related to an impairment of a trade accounts receivable,” before any potential insurance recoveries, it said.

In January, Landstar projected first-quarter earnings of $1.05 to $1.25 per share, but the SEC filing also said the company experienced elevated insurance and claim costs “primarily due to cargo theft and truck accident claim development.”

Those expenses are expected to lower earnings to between 90 cents and 95 cents, before any costs of the supply chain fraud.

TD Cowen analyst Jason Seidl said in a research note the fraud issue has been impacting the entire industry.

“Fraud and theft has been increasingly prevalent in the freight market, particularly as tech and automation have been playing a growing role in freight bookings that has enabled thieves to take advantage of the system,” he said.

Landstar said its revenue in the first quarter will be within its forecast range of $1.075 billion to $1.175 billion.

“I’m pleased that in a highly fluid freight transportation environment and ever-changing policy backdrop, we expect our revenue for the 2025 first quarter to finish at or near the mid-point of our 2025 First Quarter Prior Guidance,” CEO Frank Lonegro said in a statement in the SEC filing.

He said severe winter weather and the California wildfires reduced loads hauled in January but that was offset by a stronger than usual February.

Landstar’s disclosure came after the market closed April 2, just before the stock market’s overall meltdown began April 3.

Its stock fell as much as $20.59 over three trading days to $131.34 April 7, its lowest level since the end of 2020.

Seidl and Truist Securities analyst Lucas Servera maintained “hold” ratings on the stock after the disclosures, which Landstar presented to analysts at an April 2 meeting.

“While we expect longer-term fundamentals to remain in place, and capital returns via buybacks to continue, we see limited room for margin expansion and note cross-border risks amid tariff uncertainty (cross-border is an area of focus around Landstar’s growth strategy),” Servera said in his note.