Industrial Select Sector

Russell 2000

The Cannibal

Comparable Companies - LSTR

No open-market insider trades were reported in the last 12 months. Institutional holdings data for the quarter ending 2025-12-31 shows a net decrease of 305 shares across three filers. Short interest as of 2025-12-31 was 1,234,647 shares, representing 3.6% of the float with 3.2 days to cover. A Schedule 13G/A filing was submitted by Morgan Stanley and Atlanta Capital Management Company, LLC on 2025-09-30.

The filing states that the securities were acquired and are held in the ordinary course of business and were not acquired and are not held for the purpose of or with the effect of changing or influencing the control of the issuer.

Appointed President and CEO, succeeding James Gattoni.

President and Chief Executive Officer

Promoted to Vice President and Chief Financial Officer.

Vice President and Chief Financial Officer

Vice President, General Counsel & Secretary

Appointed President of Landstar System Holdings, Inc. Will transition to Special Advisor to the CEO in early 2026.

President of Landstar System Holdings, Inc.

Vice President and Chief Information Officer

Appointed VP and Chief Administrative Officer.

Vice President and Chief Administrative Officer

Appointed Non-Executive Chairman of the Board.

Non-Executive Chairman of the Board

Director

Frank A. Lonegro

James P. Todd

Michael K. Kneller

Joseph J. Beacom

Ricardo S. Coro

Aimee M. Cooper

Diana M. Murphy

Homaira Akbari

David G. Bannister

James L. Liang

Anthony J. Orlando

George P. Scanlon

Teresa L. White

Frank A. Lonegro brings a deep and varied background in financial and operational leadership from his extensive tenure at CSX Corporation and his role as CFO at Beacon Roofing Supply, Inc. His experience at CSX, a major rail transportation company, suggests a strong understanding of logistics and large-scale operations. His appointment as CEO of Landstar is not expected to change the company's strategic direction, indicating confidence in his ability to maintain and build upon the existing business model. His familiarity with the freight markets and his reputation as a seasoned leader position him to effectively guide Landstar's continued growth.

James P. Todd's career is marked by a solid foundation in accounting and auditing, including his experience with KPMG LLP where he served as an independent auditor for Landstar. His progression within Landstar, from Director and Assistant Corporate Controller to Vice President and Chief Financial Officer, demonstrates a deep understanding of the company's financial operations. His responsibilities encompass the entirety of the company's financial and accounting functions, highlighting his critical role in financial stewardship and strategic financial planning.

Michael K. Kneller's extensive legal background, including his tenure as a corporate attorney at Debevoise & Plimpton LLP, provides a strong foundation for his role as Vice President, General Counsel & Secretary at Landstar. His responsibility for all legal matters, coupled with oversight of Human Resources and Corporate Communications, underscores his comprehensive role in corporate governance and compliance. His academic credentials from Yale and Stanford further attest to his expertise.

Joseph J. Beacom's long-standing career at Landstar, spanning over three decades, has provided him with a deep understanding of the company's operations and its distinctive business model. His recent appointment as President of Landstar System Holdings, Inc. signifies a pivotal role in accelerating strategic growth initiatives. His extensive experience as Vice President and Chief Safety and Operations Officer, combined with his active involvement in industry associations, positions him to effectively lead and drive forward Landstar's objectives.

Ricardo S. Coro's extensive experience in technology leadership across various industries, including retail and automotive, provides a strong foundation for his role as CIO at Landstar. His responsibility for driving innovation through technology solutions for Landstar's network of agents, owner-operators, and employees is critical to the company's asset-light model. His background in aerospace engineering also suggests a rigorous, analytical approach to problem-solving.

Aimee M. Cooper's career at Landstar and its subsidiaries, encompassing various financial and administrative roles, has provided her with a comprehensive understanding of the company's operational and financial frameworks. Her experience as Vice President of Finance for a subsidiary and her subsequent role within XPO Logistics following a divestiture, have equipped her with valuable insights into corporate finance and administrative management. As Vice President and Chief Administrative Officer, she plays a key role in ensuring the smooth functioning of the company's administrative operations.

Diana M. Murphy's extensive experience in private equity and senior management roles within the publishing industry, coupled with her long tenure on Landstar's board, makes her a highly qualified Non-Executive Chairman. Her leadership in various board committees and her role as Independent Lead Director prior to becoming Chairman demonstrate a deep commitment to corporate governance. Her expertise in strategic planning and risk management is invaluable in guiding the company's long-term direction.

Dr. Homaira Akbari's distinguished career in technology, particularly in areas like IoT and cybersecurity, brings a critical and forward-looking perspective to Landstar's board. Her leadership roles at AKnowledge Partners and SkyBitz demonstrate a strong track record in driving innovation and strategic growth within technology-focused companies. Her Ph.D. in Electrical Engineering underscores her deep technical expertise, which is increasingly relevant in today's digitally transforming business landscape.

David G. Bannister's extensive career in finance, accounting, and investment banking, including senior roles at FTI Consulting, Deutsche Bank Alex. Brown, and Deloitte, provides him with a robust understanding of financial strategy and oversight. His designation as an SEC “audit committee financial expert” highlights his critical role in ensuring financial integrity and robust reporting. His long tenure on Landstar's board further adds historical context and deep institutional knowledge.

James L. Liang's extensive background in technology investment banking, corporate strategy, and venture capital, honed at firms like Morgan Stanley, IBM, and Amdocs, provides him with a unique perspective on technology-driven growth and strategic M&A. As the founder of Hope Street Advisers and an operating partner at Updata Partners, he continues to be actively involved in the technology investment landscape. His expertise is a valuable asset to Landstar as it navigates digital transformation and strategic expansion.

Anthony J. Orlando's tenure as CEO of Covanta, a significant player in the renewable energy sector, demonstrates strong leadership capabilities in managing complex operations and driving strategic initiatives. His experience in overseeing financial and accounting officers and assessing public accountants provides a solid foundation for his role as a director. As a private investor, he brings a keen understanding of financial markets and corporate value creation.

George P. Scanlon's career as a CEO and CFO, with prior experience as an accountant at PwC, provides him with a comprehensive understanding of financial management and corporate strategy. His leadership roles at FNF and Fidelity National Information Services highlight his ability to manage complex financial operations and drive business performance. His diverse industry experience and financial acumen are valuable assets to Landstar's board.

Teresa L. White's extensive experience at Aflac, culminating in her role as President of Aflac U.S., provides her with deep insights into managing large-scale operations, strategic planning, and leveraging extensive agent networks. Her diverse responsibilities across operations, IT, and sales highlight her broad business acumen. Her recognition for leadership and her current directorship at Synovus Financial Corp. further underscore her qualifications and contributions to corporate governance.

Old Dominion is a leading less-than-truckload (LTL) motor carrier providing regional, inter-regional, and national LTL services through a single integrated organization.

Provides regional, inter-regional, and national LTL services through a single integrated organization.

Saia is a transportation company providing less-than-truckload (LTL) services through a single integrated organization with a focus on geographic expansion and service quality.

Provides less-than-truckload transportation services through a single integrated organization.

C.H. Robinson is a leading global third-party logistics (3PL) provider offering a comprehensive suite of services including transportation management, brokerage, and intermodal services. It operates primarily as an asset-light logistics provider.

Provides ocean, air, customs brokerage, and other logistics services.

Provides truckload, LTL, intermodal, and brokerage services in North America.

ArcBest is an integrated logistics company that leverages technology and a full suite of solutions to meet customer supply chain needs. It operates an asset-based LTL carrier (ABF Freight) and asset-light logistics services.

Includes ABF Freight, providing LTL services.

Includes brokerage, expedited, and managed transportation services.

The company owns or leases various properties in the U.S., Canada, and Mexico. Primary facilities are located in Jacksonville, Florida and Rockford, Illinois. Corporate headquarters are in Jacksonville, Florida. The company also maintains a key freight staging and transload facility in Laredo, Texas. Operating property includes land, buildings and improvements, trailing equipment, information technology hardware and software, and other equipment.

Landstar's management team is led by a CEO with relevant cyclical logistics experience from CSX, supported by a strong, independent board with deep financial and industry expertise. However, the team's execution in the current downturn has been suboptimal for the Cyclical_Operator archetype. Capital allocation has been pro-cyclical, destroying value by aggressively buying back stock at peak valuations ($687M deployed at prices >$175) while the freight cycle deteriorated. Incentive structures remain focused on short-term EPS, which fails to align with through-cycle value creation. While the external track record of the CEO is promising and the board provides robust oversight, the current capital allocation strategy and incentive misalignment present significant risks. The team is capable but has not yet demonstrated the counter-cyclical mastery required for a top-tier score.

The transportation industry is subject to potential regulatory and legislative changes, including more stringent environmental and climate change regulations. Regulations focused on diesel emissions and other air quality matters have led to efforts to limit carbon emissions from diesel engines. For example, the California Air Resources Board (CARB) has implemented regulations requiring nearly all diesel-fueled trucks with gross vehicle weight ratings in excess of 14,000 lbs. that operate in California to have a 2010 or newer model year engine. Federal, state, and local governmental agencies may also focus on regulation in relation to trailing equipment specifications. Furthermore, agencies may engage in efforts to support legislation and regulations mandating the transition of diesel-fuel based commercial motor vehicles to zero-emission vehicles (ZEVs). For example, CARB has adopted the Advanced Clean Trucks (ACT) regulation intended to accelerate a large-scale transition to medium- and heavy-duty ZEVs. Mandates requiring the transition to ZEVs would create substantial costs for the Company's third party capacity providers and, in turn, increase the cost of purchased transportation to the Company.

As of December 28, 2024, the Company and its subsidiaries employed 1,441 individuals. The turnover rate for Landstar employees located in the United States and Canada was 12% in 2024, 14% in 2023, and 17% in 2022. Two Landstar Ranger drivers (out of a Company total of approximately 8,843 drivers for BCO Independent Contractors) are members of the International Brotherhood of Teamsters.

The Company is subject to regulations and requirements relating to safety and security promulgated by various agencies, including the U.S. Department of Homeland Security through U.S. Customs and the Transportation Security Administration. The Company retains liability of up to $2,000,000 for each general liability claim, $250,000 for each workers’ compensation claim, and $250,000 for each cargo claim. The Company has experienced, and may continue to experience, increases in the amount of cargo theft, resulting in increased exposure to liability from cargo claims. The Company also relies on its information technology systems to link its extensive network of customers, employees, agents, and third party capacity providers, and any significant disruption or failure of these systems could significantly disrupt the Company’s operations.

The Company markets its services through independent commission sales agents and third party capacity providers, including BCO Independent Contractors and Truck Brokerage Carriers. The Company is subject to regulations and requirements relating to safety and security promulgated by, among others, the U.S. Department of Homeland Security through U.S. Customs and the Transportation Security Administration, the Canada Border Services Agency, and various state and local agencies and port authorities. The Company also relies on third party insurance companies for excess coverage of commercial trucking claims, and the availability and pricing of such coverage may deteriorate.

The narrative is built upon a backdrop of declining revenue (down 9.1% in FY 2024) and compressed margins (Operating Margin down to 4.9% from 6.3%), driven by a prolonged freight recession and elevated insurance costs (7.2% of BCO revenue in Q3 2025).

CapEx is focused on 'maintenance' rather than growth, specifically trailing equipment refreshment and information technology hardware/software. Management plans to spend $16M on trailing equipment and $14M on IT in FY 2025, with $12M allocated to building/buying software applications. There is no aggressive expansion CapEx.

The auditor identified 'Self-insurance claims liability' as a Critical Audit Matter, requiring significant judgment. The company recorded impairment charges on Landstar Metro ($16.1M), the Blue TMS system ($9M), and a tech startup investment ($5M) in FY 2025 (post-period), indicating asset write-downs are occurring. The BCO truck count (an economic asset) declined 10% YoY in FY 2024.

Reinvestment is minimal (CapEx of 0.44% of revenue). The negative Incremental ROIC indicates that incremental capital invested (likely in IT and trailing equipment) has not generated positive returns relative to the decline in operating profit, reflecting the macro headwind rather than poor project selection.

Morgan Stanley

Atlanta Capital Management Company, LLC

P/Tangible Book Value

EV/EBITDA

President and CEO of AKnowledge Partners, LLC. Former President and CEO of SkyBitz, Inc. Held executive positions at Microsoft, Thales Group, TruePosition, Inc., and Cambridge Strategic Management Group. Ph.D. in Electrical Engineering.

Managing Director of Deutsche Bank Alex Brown Incorporated, General Partner of Grotech Capital Group, senior executive with FTI Consulting, Inc. Certified public accountant employed as an audit manager at Deloitte, Haskins and Sells.

Investment banker at Morgan Stanley & Co., Inc. from 1993 to 2004, culminating as head of global technology investment banking. Held key executive roles at Amdocs, Ltd. and IBM's technology services division. MBA (Finance and Marketing) from University of Chicago, BS in Applied Mathematics & Economics from Brown University.

President and CEO of Landstar System, Inc. Former Executive Vice President and CFO of Beacon Roofing Supply, Inc. Nearly 20 years at CSX Corporation in various financial and operational roles.

Non-Executive Chairman of the Board. Managing Director at Chartwell Capital Management Company (1997-2007). Over 15 years in senior management positions in the publishing industry. Board member of AIG, Atlanta Braves Holdings, Inc., and Synovus Financial Corporation. Former board member of CTS Corporation.

Private investor. Former CEO of Covanta (2004-2015). Actively supervised principal financial and accounting officer. MBA (Finance) from Seton Hall University.

Former CEO of FNF. Former Executive Vice President — Finance of Fidelity National Information Services (2009-2010) and CFO (2008-2009). Previously CFO at several companies in various industries and accountant at PwC.

Former President of Aflac U.S. (2019-2023). Held various leadership roles at Aflac since 2007. Extensive operational and strategic background with marketing, sales, talent, and risk management experience in a large, sophisticated business with an independent agent network.

James M. Applegate

Matthew M. Dannegger

Matthew Miller

All Directors, Director Nominees and Executive Officers as a group (16 persons)

Blanton Jonathan Barr

Housey Hart Melanie

For Named Executives: CEO must own equity value of no less than seven times annual salary; other Named Executives must own equity value of no less than four times annual salary, to be achieved within five years of initial appointment. For Directors: own shares in an amount no less than five times the annual cash fee payable to an outside Director within five years of initial election.

Landstar System, Inc. is a technology-enabled, asset-light provider of integrated transportation management solutions delivering safe, specialized transportation services to a broad range of customers. The Company utilizes a network of independent commission sales agents, third party capacity providers, and employees. Incorporated in Delaware in 1991, Landstar has been publicly held since its initial public offering in March 1993. The Company offers services across multiple transportation modes, from individual shipments to comprehensive third party logistics solutions.

Provides a wide range of integrated transportation management solutions. Transportation services are provided by Landstar's Operating Subsidiaries and include truckload, less-than-truckload and other truck transportation, rail intermodal, air cargo, ocean cargo, expedited ground and air delivery of time-critical freight, heavy-haul/specialized, cold chain/temperature-controlled, U.S.-Canada and U.S.-Mexico cross-border, intra-Mexico, intra-Canada, project cargo, and customs brokerage. The segment services industries including automotive parts, consumer durables, building products, metals, chemicals, foodstuffs, heavy machinery, retail, electronics, military equipment, and general commodities.

Comprised of Signature Insurance Company, a wholly owned offshore insurance subsidiary, and Risk Management Claim Services, Inc. The insurance segment provides risk and claims management services to certain of Landstar's Operating Subsidiaries. In addition, it reinsures certain risks of the Company's BCO Independent Contractors and provides certain property and casualty insurance directly to certain of Landstar's Operating Subsidiaries. Revenue represents reinsurance premiums from third party insurance companies that provide insurance programs to BCO Independent Contractors where all or a portion of the risk is ultimately borne by Signature.

Held WACC (9.1%) and Terminal Multiple (12.0x) constant, solved for perpetual EBITDA

Balance Sheet - Supplemental

Balance Sheet

Cash Flow Statement - Supplemental

Cash Flow Statement

Income Statement - Supplemental

Income Statement

Ratios

Valuation

Historical Ratios & Multiples - LSTR

The industry is in a 'Repair' phase of the capital cycle. While peers like Old Dominion and ArcBest are reducing CapEx, the market remains oversupplied with capacity. Landstar is outperforming some smaller brokers but is seeing its own revenue per load remain essentially flat, indicating a lack of pricing power in the current environment.

Landstar is relevant for analysis now because the stock has rallied 25% from its 52-week low despite deteriorating fundamentals, creating a significant valuation gap.

Divestiture of Landstar Metro and strategic review of technology assets.
Management is actively marketing the Mexican subsidiary, which could result in a one-time cash gain but will structurally reduce annual revenue by $100M.

Lower-for-longer freight recession and balance sheet risk.
A prolonged downturn could lead to further BCO attrition, permanently damaging the company's ability to scale when the cycle eventually turns.

The current asset base for Landstar System, Inc. as of December 28, 2024, primarily consists of operating property including Land ($17.389 million), Buildings and improvements ($80.719 million gross), Trailing equipment ($518.524 million gross), Information technology hardware and software ($141.029 million gross), and Other equipment ($10.231 million gross). The company owned 14,225 trailers at this date. While Landstar operates an asset-light model, these are the tangible assets directly owned. The P7 Transcript Analysis indicates that Landstar is refreshing its trailing equipment fleet and is actively marketing its Mexican logistics subsidiary, Landstar Metro, for sale, which included impairment charges in FY2025 Q3. This valuation scope focuses on the core operating property identified in the 10-K, excluding assets under divestiture or those already subject to impairment that would not contribute to an orderly liquidation value.

No direct, publicly available transaction comparables for specific Landstar assets (e.g., individual trailers, buildings) were identified within the provided documents for a liquidation scenario. The P7 transcripts mention the marketing of Landstar Metro for sale, but specific asset-level transaction details or implied values were not disclosed.

Cash & Equivalents

Accounts Receivable

Landstar System, Inc. operates with an asset-light model, primarily providing integrated transportation management solutions. This strategic approach means the company does not typically own or hold physical inventory of goods for sale. Consequently, both the balance sheet as of December 28, 2024, and the TTM metrics explicitly report zero inventory. Therefore, in an orderly liquidation scenario, no value can be attributed to inventory, and all recovery rates are 0% across all scenarios. The nature of Landstar's operations, focusing on logistics coordination rather than commodity trading or manufacturing, fundamentally precludes the existence of material inventory to be valued.

Inventory

Short-Term Inv.

Other Current Assets

**Primary Transaction Comps:**
- No direct, publicly available transaction comparables for specific Landstar assets (e.g., individual trailers, buildings) were identified within the provided documents for a liquidation scenario. The P7 transcripts mention the marketing of Landstar Metro for sale, but specific asset-level transaction details or implied values were not disclosed. (N/A)

**Replacement/Scrap Data:**
Landstar anticipates acquiring approximately $16 million in new trailing equipment in fiscal year 2025, primarily for replacement. They also plan to spend around $14 million on information technology hardware and software, with $12 million dedicated to new software applications, and approximately $4 million on buildings and improvements in fiscal year 2025. The gross cost of owned trailing equipment was $518.524 million as of December 28, 2024, implying an average gross cost of approximately $36,450 per owned trailer (518.524 million / 14,225 trailers). Depreciation periods are 7-10 years for trailing equipment, 30 years for buildings, and 3-7 years for IT hardware/software.

Net PP&E

Intangibles

Other Non-Current

Accounts Payable

Current Debt

Tax Liabilities

Other Current Liabilities

Non-Current Debt

Deposits

Other Non-Current Liabilities

Market/Sector Move -8.75%

Landstar System price target raised to $155 from $130 at Barclays

Landstar System price target raised to $147 from $140 at Stifel

Landstar System price target raised to $151 from $125 at Evercore ISI

Landstar System price target raised to $160 from $110 at Susquehanna

Landstar System price target raised to $159 from $147 at Baird

Landstar System upgraded to Overweight from Equal Weight at Wells Fargo

Landstar System price target raised to $135 from $133 at Morgan Stanley

Landstar System initiated with an Equal Weight at Wells Fargo

Landstar System price target lowered to $130 from $135 at Barclays

Landstar System price target lowered to $110 from $121 at Susquehanna

Landstar System price target lowered to $130 from $131 at Stifel

Landstar System price target lowered to $135 from $145 at Barclays

Landstar System price target lowered to $125 from $132 at Evercore ISI

Landstar System price target lowered to $123 from $125 at Susquehanna

Landstar is a Cyclical Operator whose stock price has decoupled from fundamental reality, trading at 38.4x TTM P/E despite a 9.1% revenue decline and a 10% contraction in its core BCO capacity base. While the market is extrapolating a minor sequential stabilization in truck counts as a cyclical inflection, our analysis suggests the company is facing structural margin compression from insurance costs and value-destructive capital allocation. We conclude that the current valuation provides no margin of safety, with a fair value of $110.64 representing 27.9% downside.

Executive Summary

The primary value driver is the market's over-optimism regarding a freight cycle turn, which ignores the 10% YoY decline in the BCO truck count and the $30.1M in recent non-cash impairment charges. We expect a downward valuation rerating as earnings fail to meet the high expectations embedded in the current 22.0x EV/EBITDA multiple. Downside is partially protected by a pristine balance sheet with no debt and $375.2M in cash, though this does not justify the current 5.9x Price/Book valuation.<ul><li>Driver: Fundamental Decoupling and Asset Base Erosion</li><li>Catalyst: Earnings normalization and continued BCO attrition</li><li>Protection: Fortress balance sheet with $250M in net cash</li></ul>Our variant perception is that the market is incorrectly pricing Landstar as a high-quality compounder at the start of an upcycle, whereas our analysis of the capital cycle and internal capacity metrics suggests the company is a Cyclical Operator still mired in a 'Repair' phase. The market is cheering a sequential increase of just 7 trucks in the BCO count, while ignoring that the total capacity base has shrunk 10% over the last year and insurance costs have spiked to 7.2% of BCO revenue, creating a structural headwind to margin recovery.This is a mid-term, cyclical trade designed to capture the downside from a peak valuation to a mid-cycle normalization, as the market realizes the current trough earnings are not a temporary blip but a reflection of a structurally challenged asset-light model.

Core Investment Rationale

Landstar operates an asset-light transportation management model, utilizing a network of approximately 1,400 independent commission sales agents and a fleet of Business Capacity Owners (BCOs) who are independent contractors under exclusive lease. This model allows Landstar to variabilize approximately 86% of its costs, as it pays agents and BCOs only when freight is hauled. Revenue is primarily generated from truckload transportation (98.7% of revenue), with a small insurance segment providing reinsurance for its BCOs. The strategy focuses on high-margin, specialized freight such as heavy-haul and cross-border logistics between the U.S., Mexico, and Canada.Landstar's core assets are its network of 1,400 agents and its fleet of approximately 8,843 BCO trucks. Unlike asset-heavy peers, Landstar's physical assets are limited to 14,225 trailing equipment units and its proprietary technology platforms, including Landstar TMS and LandstarOne. The operational leverage is derived from the scale of this network, which allows the company to respond to market supply/demand dynamics without the burden of fixed fleet maintenance costs.The industry is highly fragmented and currently destructive, with Landstar competing against global 3PLs like C.H. Robinson and asset-based LTL carriers like Old Dominion Freight Line. While Old Dominion maintains a significantly larger market cap of $36.7B, Landstar's asset-light model provides a structural cost advantage during downturns. However, this advantage is being tested as peers like ArcBest and C.H. Robinson aggressively compete for volume, leading to industry-wide gross margin compression.Landstar is currently navigating the tail end of a severe freight recession that saw revenue drop from a peak of $7.4B in 2022 to $4.8B in 2024. During the last full business cycle, the company benefited from COVID-driven peak economics, but it is now struggling with a 28.7% drop in loads hauled since 2023. The current situation is defined by a leadership transition, with Frank Lonegro taking over as CEO in February 2024. Under his tenure, the company has faced persistent insurance cost spikes and a $4.8M fraud charge in early 2025. Materially, the company is currently marketing its Mexican subsidiary, Landstar Metro, for sale and has taken $30.1M in impairments on technology assets, signaling a strategic retreat and a recognition that prior investments in platforms like Blue TMS have failed to generate expected returns.

Business & Situation

<ul><li>Bull Case: A rapid tightening of industry capacity leads to a sharp spike in spot rates, allowing Landstar's variable cost model to generate massive operating leverage. The stabilization of the BCO count in Q3 2025 marks the definitive bottom of the cycle.</li><li>Bear Case: The 10% YoY decline in BCO capacity is structural, not cyclical, as high operating costs drive owner-operators out of the industry permanently. Insurance costs remain elevated at >7% of revenue, permanently impairing the company's mid-cycle margin potential.</li></ul>The consensus view is that Landstar is a 'best-in-class' asset-light operator at the cusp of a cyclical recovery. Investors are looking past the 32% decline in operating income, focusing instead on the sequential BCO count increase and the company's ability to return cash to shareholders through special dividends and buybacks.This narrative has pushed the stock to a 38.4x P/E multiple, nearly double its 5-year average of 23.3x.The industry is in a 'Repair' phase of the capital cycle. While peers like Old Dominion and ArcBest are reducing CapEx, the market remains oversupplied with capacity. Landstar is outperforming some smaller brokers but is seeing its own revenue per load remain essentially flat, indicating a lack of pricing power in the current environment.Our differentiated view is that the market is ignoring the value destruction occurring through pro-cyclical capital allocation. Management deployed $687M into buybacks at prices often exceeding $175, while the business was fundamentally contracting. Furthermore, the $30.1M in technology impairments suggests that Landstar's 'moat' of digital tools is less robust than management claims. The governance friction, evidenced by a CEO with minimal skin in the game (0.06% ownership) and a Nom/Gov Chair with 27 years of tenure, suggests a lack of urgency in addressing the structural erosion of the BCO fleet.We believe the market's 'recovery' narrative is premature and overvalued. The disconnect between a 38x P/E and a 9% revenue decline is unsustainable, especially as insurance costs and capacity attrition continue to weigh on the bottom line.Our analytical edge is a granular decomposition of the BCO capacity base and insurance cost structure, which reveals that the coming upcycle will be hampered by a smaller, more expensive fleet than the market currently assumes.

Core Thesis

CEO Frank Lonegro has a strong pedigree from CSX, where he served as CFO during a period of significant operational improvement. However, his one-year tenure at Landstar has been marked by pro-cyclical capital allocation and a failure to stem the 10% decline in BCO count. There is no evidence of a contested transition, but his lack of open-market share purchases suggests a lack of personal conviction in the current price.Capital allocation skill is rated as weak. Management has aggressively shrunk the share count by 9.9% over the last five years, but the timing has been poor. Specifically, $687M was spent on buybacks at elevated multiples (EV/EBITDA scores as low as 9/100), resulting in a negative Trade ROI on 9 of the last 12 tranches.Management maintains a candid tone in transcripts but has struggled with guidance, missing EPS estimates in 40% of the last five years due to 'unforeseen' insurance volatility.<ul><li>Board Independence: 87.5% (7 of 8 directors)</li><li>Chairman/CEO Roles: Separate</li><li>Chairman Tenure: 27 Years (Diana M. Murphy)</li><li>Insider Ownership: 0.8% (All directors and officers)</li><li>Shareholder Rights: Declassified Board, Majority Voting</li></ul>Stewardship is adequate but hampered by a lack of alignment. The governance outcome tree suggests: 1. Status Quo: Management continues pro-cyclical buybacks, further eroding per-share value if the cycle turn is delayed. 2. Strategic Review: The sale of Landstar Metro (announced) could provide a cash infusion but reduces revenue by $100M annually. 3. Reset: A potential activist win could force a more disciplined approach to buybacks, but no such campaign is currently active.

Leadership & Governance

The valuation floor is derived from the Bear Case DCF Value, which assumes a prolonged freight recession and continued BCO attrition. This is more conservative than the historical trough P/Tangible Book multiple of 3.2x, which would imply a floor of $79.04.Revenue stabilizes in 2025 and grows 3% thereafter as capacity rationalizes. Operating margins recover to the 5.5% historical average by Year 5.Rapid capacity exit drives 5% revenue growth and margins expand to 7.5%. Bull Case Value: $140.95 (Blue-Sky Potential).The Bear Case Fair Value is $12.67, derived from the Net Liquidation Value (NLV) in a 'Fire Sale' scenario. However, for a going concern, the severe operational decline DCF of $78.75 serves as the practical floor.

Valuation Context

<ul><li>Divestiture of Landstar Metro and strategic review of technology assets.
Management is actively marketing the Mexican subsidiary, which could result in a one-time cash gain but will structurally reduce annual revenue by $100M.</li></ul>Landstar is relevant for analysis now because the stock has rallied 25% from its 52-week low despite deteriorating fundamentals, creating a significant valuation gap.

Catalyst Path & Context

<ul><li>Lower-for-longer freight recession and balance sheet risk.
A prolonged downturn could lead to further BCO attrition, permanently damaging the company's ability to scale when the cycle eventually turns. BCO truck count has already declined 10% YoY, and loads hauled are down 8%.</li></ul>

Primary Risks

<ul><li>Entry Target: Not applicable for a Sell recommendation.</li><li>Stop Loss: Not applicable for a Sell recommendation.</li><li>Position Size: Sizing reflects a 'None' posture as the current valuation offers no margin of safety and significant downside risk.</li><li>Time Horizon: Not applicable for a Sell recommendation.</li></ul><ul><li>Sequential BCO truck count changes</li><li>Insurance and claims costs as a percentage of BCO revenue</li><li>Revenue per load growth relative to LTL peers</li></ul>Evidence that the freight cycle is inflecting significantly stronger and sooner than expected, leading to a rapid 10%+ spike in revenue per load.

Actionable Parameters & Monitoring

Landstar System is a high-quality asset-light business currently trading at a valuation that ignores its structural capacity erosion and pro-cyclical capital allocation errors. With a fair value of $110.64 against a current price of $153.55, the risk/reward is heavily skewed to the downside. We recommend a Sell with a valuation target of $110.64.

Final Conclusion

Fundamental Decoupling and Asset Base Erosion

Driver

Earnings normalization and continued BCO attrition

Catalyst

Fortress balance sheet with $250M in net cash

Protection

A rapid tightening of industry capacity leads to a sharp spike in spot rates, allowing Landstar's variable cost model to generate massive operating leverage. The stabilization of the BCO count in Q3 2025 marks the definitive bottom of the cycle.

Bull Case

The 10% YoY decline in BCO capacity is structural, not cyclical, as high operating costs drive owner-operators out of the industry permanently. Insurance costs remain elevated at >7% of revenue, permanently impairing the company's mid-cycle margin potential.

Bear Case

Landstar is a Cyclical Operator whose stock price has decoupled from fundamental reality, trading at 38.4x TTM P/E despite a 9.1% revenue decline and a 10% contraction in its core BCO capacity base. While the market is extrapolating a minor sequential stabilization in truck counts as a cyclical inflection, our analysis suggests the company is facing structural margin compression from insurance costs and value-destructive capital allocation. We conclude that the current valuation provides no margin of safety, with a fair value of $110.64 representing 27.9% downside.

The strategy has evolved from a defensive posture focused on weathering a prolonged freight recession (FY23-Q4 through FY24-Q2) to a selective growth and optimization phase (FY25). Initially, the focus was on cost discipline and defending margins amidst soft demand. By FY25, the narrative shifted toward capitalizing on heavy haul strength, divesting non-core assets (Landstar Metro), and leveraging technology (AI) to drive efficiency, while maintaining a disciplined approach to BCO capacity.

Method	Implied Value	Weight	Weighted Value
DCF	$111.84	50%	$55.92
Comps	$109.43	50%	$54.72
Total Weighted			$110.64

LSTR

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