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Landstar (NASDAQ:LSTR) is a trucking company that has been a staple in my portfolio for years. The company has a solid business, but like any sector, there are ebbs and flows. Over the last year Landstar has seen a low of just under $48, while it high is at just above $59. The equity currently trades at just under $53 per share.

Essentially trucking is the backbone of this country. If you buy it at a store, somewhere along the line trucking and warehousing were involved. The sector is impacted by many things. Fuel prices can be volatile and the per load rates can shift. The recent trends in the economy have people trying to find efficiencies anywhere they can.

Landstar will be offering its Q2 update on July 25th. I'm not expecting any real upside surprise, nor a big negative that will drive a sell-off. Essentially what will cause Landstar to move appreciably is an ever improving economy. The margins will continue to improve slowly as the economy gathers its footing. An 18-wheeler does not get going full steam right out of the gate. It builds up to highway speeds. Likewise, it does not stop on a dime and reverse directions.

The trick with this sector is understanding that when it gets going at highway speeds it simply tends to keep moving in that direction. The trick with Landstar is finding the correct entry point. That day may be coming.

As stated above, the quarterly call is only a week and a half away. The mid quarter report was a ho-hum affair with glimmers of certain positives on the horizons. I suspect that in the 7 weeks since that report there has not been a boom of business, but rather a story of business as usual. For this reason, the equity may actually find a lull in the stock price. This can present an opportunity for a savvy investor.

As the quarterly call approaches it is a good time to outline expectations. Landstar has issued guidance on a few metrics. This is where opportunity can present itself for the savvy investor.

  • The company has stated that Q2 2013 revenues will fall somewhere between 2% and 4% from last year's number. This is contrasted by a gross profit margin that is expected to increase from 15.9% a year ago to somewhere between 16% and 16.2%
  • The company has guided that the overall sector is still "soft." What investors are looking for is any sign of traction.
  • The company has guided to earnings between $0.63 and $0.68 per share. The previous guidance was for an EPS of between $0.68 and $0.73 per share. Essentially the expectation bar has already been lowered. If Landstar can come at the high end of this range it could be perceived as slight traction developing.
  • Landstar is guiding to production increases in the second half of the year. This would be an indication that the sector will gradually see more health.

There exist several competitors in the sector. Companies like Old Dominion (NASDAQ:ODFL) operate a different business model. Old Dominion owns and operates a fleet, whereas Landstar is a broker that relies on an owner operated fleet. The Landstar model offers efficiencies in that when times are slow the overhead drops because the company does not own the trucks and the drivers are independent. However, the downside to that model is that Landstar is not controlling the drivers either. It will take an overall rising tide to bring the trucking numbers back up to previous levels.

If you look at the bigger picture, the economy seems to be getting better footing with each passing month. When it does stumble it has been able to recover more quickly each time. That would seem to indicate that things are looking up more than they are down. As improvement happens cash will begin to flow. Flowing cash creates movement in many sectors. At that point we can boil it down to this. Overall improvement in the economy will help the trucking sector. Simply stated, Landstar is not at highway speed, but may well be grinding through the gears on the way up to it. If there is a lull in the stock it may be the best opportunity to add the trucking sector to your portfolio.

Watch this stock closely around the quarterly call. Despite trading at the middle of the 52-week range, Landstar could be a buy. If we see additional traction in the economy, more construction and more movement the Landstar story could benefit quickly. Stay tuned.

Source: Is Landstar A Buy?

Additional disclosure: I have no position in Old Dominion