Landstar expects to emerge a winner in post-Montgomery world

Freight broker Landstar System said Tuesday that its larger scale and long track record of safety will become more attractive to shippers in a post-Montgomery world. The company saw a more material turnaround in operations during the second quarter even though results fell short of analysts’ expectations.

Revenue generated by Landstar’s (NASDAQ: LSTR) business capacity owners (BCOs) increased 22% year over year to $563 million, as loads were up 10% and revenue per load was up 11%. Landstar’s BCOs are owner-operators who haul almost exclusively for the company.

Changes among this segment of capacity have historically signaled turns in the broader truckload market. Trucks provided by BCOs increased 68 units sequentially to 8,544 units in the second quarter. This was the largest increase since the 2022 first quarter. The tractor count is up another 49 units so far in July. BCO turnover improved 310 bps y/y to 28.

3% as utilization improved 12% y/y. BCO revenue per mile—Landstar’s preferred metric for TL pricing as it excludes fluctuations in diesel fuel prices—was up 11% y/y and 10% y/y on dry van and flatbed shipments, respectively. Management sees this segment of capacity potentially growing faster following the Supreme Court’s Montgomery v.

Caribe Transport II ruling, which widened liability exposure for freight brokers found negligent in their driver hiring practices. The company said it is also having success courting small brokers looking to partner with brokers with better tech, vetting protocols and insurance programs.

It recently inked a deal with a Midwest broker to become a Landstar agent. The broker is generating approximately $18 million in annual revenue, much larger than most new Landstar agents, which have less than $5 million in revenue. Landstar has culled its approved carrier list from over 100,000 in 2022 to 64,600 in the recent quarter.

It originally started the exercise to weed out cargo theft. Landstar’s approved truck brokerage carrier list was down another 7% y/y in the second quarter after falling 19% in the first quarter. Table: Landstar’s key performance indicators Q2 EPS miss explained Landstar reported second-quarter earnings per share of $1.

44, which was 24 cents higher y/y but 4 cents below the consensus estimate. Consolidated revenue of $1. 43 billion was 18% higher y/y and ahead of the $1. 34 billion consensus estimate. Landstar called out $10. 5 million (23 cents per share) in unfavorable developments on prior-year claims as a headwind to second-quarter EPS.

Also, the consensus EPS estimate gapped up from $1. 35 to $1. 48 in the 90 days leading up to the print, according to Yahoo Finance. Analysts raised numbers for carriers and brokers as TL spot market conditions firmed throughout the quarter. Total truck revenue jumped 19% y/y to $1. 33 billion as loads increased 2% and revenue per load surged 17%.

Higher diesel fuel prices along with higher TL rates drove the yield increase. Management said that both truck volumes and revenue per load outpaced normal seasonal patterns in the quarter.

The company normally sees no material change in truck revenue from the second to the third quarter, but both July truck loads and yields are above typical sequential seasonal trends (5% and 26% higher y/y, respectively). In the second quarter, dry van loads increased 5% y/y, with revenue per load up 16%. Flatbed loads grew 2%, with yield up 20%.

SONAR: Outbound Tender Rejection Index (OTRI. USA) for 2026 (blue shaded area), 2025 (yellow line), 2024 (green line) and 2023 (pink line). A proxy for truck capacity, the tender rejection index shows the number of loads being rejected by carriers. Current tender rejections show a tight truckload market. To learn more about SONAR, click here.

SONAR: National Truckload Index (linehaul only – NTIL. USA) for 2026 (blue shaded area), 2025 (yellow line), 2024 (green line) and 2023 (pink line). The NTIL is based on an average of booked spot dry van loads from 250,000 lanes. The NTIL is a seven-day moving average of linehaul spot rates excluding fuel.

Rates remain significantly higher on a y/y comparison in July. Variable contribution, or net revenue, increased 17% y/y to $199 million. (The calculation measures revenue remaining after purchased transportation expenses and agent commissions are paid.) A variable contribution margin of 13. 9% was 20 bps lower y/y.

The operating margin (as a percentage of variable contribution) improved 20 bps y/y to 33. 2%. Insurance and claims expenses (as a percentage of BCO revenue) increased 40 bps to 7% even though it “experienced a lower DOT accident frequency [0. 62 reportable accidents per one million miles] during the 2026 first half.”

It said unfavorable developments on prior claims were the drag. Management said it “did quite well” with a June insurance renewal. The auto liability insurance tower renewed unchanged and the broker liability policy was only 3% higher. Shares of LSTR were down 4. 2% in after-hours trading on Tuesday