A Logistics Pair Trade: Pick Up Landstar, Dump JB Hunt

Stunted vehicle production, driver shortages and regulatory limitations are set to confront a peak in trucking demand, pressing freight rates toward all-time highs.

The backdrop is a boon for some logistics companies, but others won’t fare so well, according to Goldman Sachs. 

The Rating

Goldman Sachs analyst Matt Reustle initiated coverage on Landstar System, Inc. (NASDAQ: LSTR) with a Buy rating and $130 price target and on J B Hunt Transport Services Inc (NASDAQ: JBHT) with a Sell rating and $102 price target.

The Thesis

Reustle expects Landstar’s “superior business model,” relative insulation and pure exposure to spot rates to protect margins and capture rate-volatility upside. (See the analyst's track record here.)

“Landstar has built a network of shippers and carriers by starting with dedicated capacity and then expanding to third-party capacity, which together create a network with barriers to entry from technology-focused new entrants,” he said in a Tuesday note.

Meanwhile, JB Hunt is expected to suffer margin pressure from inefficiencies related to rail service deterioration, increased drayage costs and declining turnover in customers’ intermodal containers.

“While we believe the longer-term outlook positions JBHT well to capture intermodal demand, we see less operating leverage in the near term as intermodal networks adjust to higher volumes,” Reustle said.

Price Action

At the time of publication, JB Hunt was trading up 1.32 percent and Landstar was up 2.19 percent. 

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