Key Points
- J.B. Hunt stock rallied by over 20% during its latest quarterly release, signaling a potential sentiment rebound in the trucking industry to help others.
- Landstar is up next to report its quarter, with a more nimble and technology-leveraged business to carry out an EPS beat.
- Wall Street analysts expect to see double-digit growth in earnings to support a new bull run in this company.
The stock market is a rational machine, sometimes pricing in economic developments and other events into company valuations. While some of these opinions are valid for a period, they become overstretched and irrational, which is where savvy investors can step in and collect profits on a relatively low-risk basis. In today's environment, the transportation sector is one such area of opportunity.
With shares of J.B. Hunt Transport Services Inc. (NASDAQ: JBHT) rallying by over 26% in a single month, some of the bearish opinions surrounding the transportation sector may begin to fade away in the coming months. Such an extreme (or bearish complacency) can be seen in the First Trust Nasdaq Transportation ETF (NASDAQ: FTXR), whose top holdings are concentrated on airline stocks rather than trucking, an imbalance that could soon be corrected.
However, the risk of tariffs and inflation remains present, so while J.B. Hunt came out a winner in its latest quarterly report, there is one stock that is better positioned to deliver a similar reaction to its shareholders. That stock is Landstar Systems Inc. (NASDAQ: LSTR), which, by association as well as its own merits, can bring about double-digit percentage growth to portfolios in the coming months through its business model.
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Sentiment Confirmation by Association
J.B. Hunt's rally could help bring back some positive sentiment to the transportation industry and the FTXR exchange-traded fund, but most of the upside is probably already priced in after this big move. However, that doesn't mean all opportunity is lost, as there is now a possibility that these effects can spill over to other parts of the industry.
This is where Landstar comes into play, a name that should be correlated with what J.B. Hunt stock just did, as they are part of the same industry. More than just being associated through the industry, the higher demand for trucking and robust logistics across the United States creates a specific opportunity in Landstar.
Landstar is not just a trucking and logistics company; it also offers a software-as-a-service (SaaS) aspect. However, before investors delve into the financial benefits and leverage this company has at its disposal to deliver further upside, there is one thing to keep in mind.
Landstar stock is up 6% in one week already, showing signs of pre-earnings optimism as they report on Oct. 28, but also confirmation that J.B. Hunt's admission of higher demand and industry recovery can bring a few bulls to land on Landstar as well.
How Landstar's Business Makes It a Good Pick
Returning to the software exposure in Landstar, this company boasts a gross profit margin of 19.6%, which is slightly higher than J.B. Hunt's 18.9%. However, this tells investors very little about the business's efficiency, and not much more than just pricing power and service optimization.
A more accurate gauge for investors to consider when evaluating Landstar's follow-up rally to J.B. Hunt is the balance sheet comparison between these two companies. Whereas J.B. Hunt carries over $8 billion in total assets, Landstar is able to generate better margins on just $1.7 billion in assets.
That nimbleness can come in handy during markets like today's, where the tariff uncertainty affecting demand cycles can create pressures and bottlenecks for trucking companies. In addition to being a nimble business, Landstar's revenue can also be diversified through its logistics software segment.
In times like these, higher costs could drive operators to seek out cost-saving benefits through technology, and Landstar's services can fulfill that need and already are fulfilling. Capacity utilization (sales divided by assets) for Landstar is just over 150%, compared to J.B. Hunt's 48%, which is closer to the industry average.
What this means is that Landstar's business can operate at high demand and throughput thanks to the software leverage it carries, creating a tailwind of additional earning power when the traditional trucking business picks back up (as it is now). All told, here is what investors need to take away from Landstar's next quarter.
If J.B. Hunt was able to rally by this much, being a less nimble and diversified business, then Landstar can do just as well, if not better, should they report a strong quarter. Speaking of earnings, the MarketBeat consensus expects to see $1.45 in earnings per share (EPS) for the second quarter of 2026, a jump of 21% from the latest EPS of $1.20.
That should be enough to send the stock to new highs, especially as it now trades at 67% of its 52-week high. Recognizing the disconnect between future growth and current valuations, markets have assigned a premium valuation to Landstar, reflected in a price-to-book (P/B) multiple of 4.8x, compared to the transportation sector's average of 2.4x P/B.
This premium indicates that the market expects high returns on Landstar stock, given its current setup and price discount, which offers an opportunity to boost earnings this quarter.
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