TFI International Inc. (TFII) on Q1 2023 Results - Earnings Call Transcript

Operator: Good afternoon, ladies and gentlemen. Thank you for standing by. Welcome to TFI International's First Quarter 2023 Results Conference Call. At this time, all participants are in a listen-only mode. Following the presentation, we will conduct a question-and-answer session. Callers will be limited to one question and a follow-up. Again, that's one question and a follow-up, so that we can get to as many callers as possible. Further instruction for entering the queue will be provided at that time. Please be advised that this conference call will contain statements that are forward-looking in nature and subject to a number of risks and uncertainties that could cause actual results to differ materially. Also, I would like to remind everyone that this conference call is being recorded on Wednesday, April 26, 2023. I will now turn the call over to Alain Bedard, Chairman, President and Chief Executive Officer of TFI International. Please go ahead, sir. Alain Bedard: Well, thank you for the introduction, operator, and welcome everyone to this morning’s call. Yesterday after the market close we release our first quarter 2023 results. Many times over the years, including last year, you've heard me mention that profitability and cash flow are most important to us as they allow us to be nimble especially during uncertain times when we can capitalize on market turbulence. This means that the ability to steadily invest in the business opportunistically pursue acquisition and return excess capital to shareholders whenever possible. During the first quarter, we generated a 69% increase in net cash from operating activity to $232 million and our free cash flow more than double up 113% to nearly $200 million. While our strong cash flow performance benefited from working capital fluctuation, it also comes despite reduce freight volumes despite the unfavorable FX impact and despite our sales last August of CFI. Our operating income during the first quarter was $166 million with an operating margin of 10.7% versus the year earlier period of $220 million with an operating margin that was 90 basis points higher at 11.6%.In addition, our adjusted net income of $117 million was down from $158 million the prior year and our adjusted diluted EPS was $1.33 was down from $1.68. Important the year-over-year change in these items reflects not only the reduced rate volumes and the sale of CFI, but also the fact that our earnings are fully burdened by several items for which we did not adjust. These include severance package related to early retirement offers, costs associated with transitioning IT system from UPS, the mark-to-market on DSU and provide an unfavorable variance to our reported earnings this quarter and again foreign exchange fluctuation. We did not adjust for any of these items, the first two of which the severance cost and the IT system transition will help to streamline operation and enhance our efficiency going forward. The move of the financial system in particular will result in better control and insight into acquired TForce Freight operation and allow us to exit our TSA with UPS. With that, let's have a look at how each of our four business segments performed during this quarter, some of which produced significant increases in return on invested capital even as we navigated uncertain economic times, starting with our P&C, our package, which represent 8% of our segment revenue before fuel surcharge, the number of package across the segment was down 5% year-over-year and our revenue before fuel surcharge was down 10%. However, our operating income of $27 million was up 5% over the prior year with our margin expanding 240 basis points, and our return on invested capital was a strong 31.5% which was up considerably from 26.4% a year earlier. Our next segment to discuss is LTL, which is 46% of segment revenue before fuel surcharge. Our shipments were down 20% in the U.S. and 9% in Canada, which along with foreign exchange, impact contributed to a 17% decline in our revenue before fuel surcharge. Reported operating income of $58 million was down 39% fully burdened by the costs I've referenced earlier, that we do not exclude namely severance costs and IT system transition again. Within LTL, Canadian revenue before fuel surcharge was down 12% but we achieved a significantly improved operating ratio of 75.5% which was 360 basis points better than the prior year period. Similarly, our return on invested capital for our Canadian LTL was 23.2% up significantly from 18.4% a year earlier. As for the U.S. LTL, revenue before fuel surcharge was up 18% on the ongoing volume headwinds. We continue to streamline operation following the acquisition of TForce Freight. However, our adjusted operating ratio of 95.7% was up from 90.7% a year earlier on the reduced volume as well as the non-recurring costs. The transition to the new financial system is now complete, which should benefit us going forward and we continue to see additional opportunity to take cost out of the business. Return on invested capital for U.S. LTL was 17.4% as compared to the prior year's quarter of 22%. Next, let's discuss Truckload, which is 27% of our segment revenue before fuel surcharge. Reflecting our sales of CFI last year, truckload saw revenue before fuel surcharge fall 20% partially on the impact of foreign exchange. Our operating income held almost flat, down just 1% again despite the CFI sales over the course of the past year, reflecting a 320 basis point margin improvement. Digging deeper, Specialized operation held revenue virtually flat despite foreign exchange benefiting from our diversity and exposure to niche market. We also saw an improved OR of 84.5%, 250 basis point better than a year earlier. Our Specialized Truckload return on invested capital came in at 14.1% and we view this business as having additional self-help opportunities ahead. Canadian based conventional truckload was also solid with revenue before fuel surcharge up slightly, again even stronger on a constant currency basis. Our adjusted operating ratio for conventional truckload improved a significant 440 basis point to 81.2% and our return on invested capital was 21.3% much stronger than the prior year's quarter of 11.7%, as we continue to focus on network density, cost control and improving the operation of recently acquired businesses. We believe these overall solid results for Truckload, which again were even stronger on a constant currency basis underscore our point last quarter that our business is now more resilient during volatile market condition with lower U.S. dry van exposure following the sales of CFI. Our last segment to review is Logistics, which represent 20% of segment revenue before fuel surcharge. Our revenue before fuel surcharge of $355 million was down 18% on volume weakness as well as a difficult year-over-year comparison and foreign exchange impact. Within Logistics, brokerage volume were weak while same day package delivery volumes were relatively stable, thanks primarily to the successful efforts of our sales team in bringing on new customers. Our operating income fair better of 9% to $32 million reflecting successful containment of expenses. As a result, our operating margin actually improved 90 basis point to 8.9% and our return on invested capital was 19.3% almost flat with the quarter of ‘22 despite the lower volume this quarter. TFI International's balance continues to benefit from our strong free cash flow, which was nearly $200 million during the quarter as I mentioned. Our funded debt to adjusted EBITDA ratio came in just below [$1 at $0.98] (ph) as of March. As a reminder, our debt is almost entirely at a fixed rate, which is a weighted average cost of less than 3.5%. This strong capital position is what allows us to strategically invest in the business even during times of uncertainty, while also returning capital to our shareholders whenever possible. Year-to-date, we have completed five tuck-in acquisitions including one subsequent to the first quarter. During the quarter, we also announced that our Board of Directors approved a $0.35 quarterly dividend, which is 30% higher than the year earlier level. I'll wrap it up with our updated outlook. We are updating our guidance provided in February to a range of $7 to $7.25 for the 2023 earnings per share, U.S. Dollars. We also anticipate free cash flow of $700 million to $800 million which is based on net CapEx of between $200 million to $225 million. I also note that these ranges now reflects $300 million of capital deployed towards either M&A and share buyback. And now operator, if you could please open the lines, we're ready to move to the Q&A portion of the call. Operator: [Operator Instructions]. Our first question comes from Scott Group with Wolfe Research. Please go ahead. Operator: Our next question comes from Ravi Shanker with Morgan Stanley. Please go ahead. Operator: Our next question comes from Cameron Doerksen with National Bank Financial. Please go ahead. Operator: Our next question comes from Paul Stoddard with Goldman Sachs. Please, Paul, go ahead. Operator: Our next question comes from Walter Spracklin with RBC Capital Markets. Please go ahead. Operator: Our next question comes from Jack Atkins with Stephens, Inc. Please go ahead. Operator: Our next question comes from Konark Gupta with Scotiabank. Please go ahead. Operator: Our next question comes from James Monigan with Wells Fargo. Please go ahead. Operator: Our next question comes from Kevin Chiang with CIBC. Please go ahead. Operator: Our next question comes from Benoit Poirier with Desjardins Capital Market. Please go ahead. Operator: There are no further questions at this time. So, we conclude our question and answer session. I would like to turn the floor back over to Mr. Bedard for closing remarks. Please go ahead sir. Alain Bedard: Okay, so alright. Thank you operator and thank you everyone for being with us this morning. So, please enjoy the rest of your day and if you have any follow-up questions don’t hesitate to reach out. As always we appreciate your interest in TFI International. Thank you again and see you soon for the Q2 results. Have a great day. Take care. Operator: Thank you. This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.
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TFI International Inc. (NYSE:TFII) Faces Legal Challenges Amidst Optimistic Price Target

  • Stifel Nicolaus sets a price target of $88 for TFI International Inc. (NYSE:TFII), indicating a potential increase of approximately 10.23% from its current price.
  • TFII is currently involved in a class action lawsuit over allegations of securities law violations, which could affect investor sentiment and stock performance.
  • The company's stock has shown significant volatility, with a yearly high of $158.93 and a low of $72.02, amidst a current market capitalization of approximately $6.74 billion.

TFI International Inc. (NYSE:TFII) is a prominent player in the transportation and logistics industry. The company provides a wide range of services, including truckload, less-than-truckload, and logistics solutions. As of April 28, 2025, Stifel Nicolaus set a price target of $88 for TFII, suggesting a potential price increase of approximately 10.23% from its current trading price of $79.83.

Despite this optimistic price target, TFII is currently embroiled in a class action lawsuit. The lawsuit, filed in New York, accuses the company of securities law violations. It alleges that TFII made false statements and concealed important information, which led to shareholder losses. The lawsuit specifically points to a decline in TForce revenue due to the loss of small and medium business customers.

The lawsuit covers the period from April 26, 2024, to February 19, 2025. Investors who have experienced losses are encouraged to contact Levi & Korsinsky before May 13, 2025, to explore their rights and potential recovery under federal securities laws. This legal challenge could impact investor sentiment and the stock's future performance.

Currently, TFII's stock price is $79.83, showing a slight decrease of 0.01% from the previous trading session. The stock has fluctuated between a low of $79.07 and a high of $80.64 today. Over the past year, TFII has experienced a high of $158.93 and a low of $72.02, indicating significant volatility.

TFII's market capitalization stands at approximately $6.74 billion, reflecting its substantial presence in the industry. Today's trading volume for TFII is 305,415 shares, suggesting active investor interest. As the company navigates its legal challenges, investors will closely monitor its performance and any developments related to the lawsuit.

TFI International Inc. (NYSE: TFII) Financial Overview and Analyst Insights

  • Analyst Price Target: Matt Summerville from D.A. Davidson set a price target of $80 for TFII, indicating a potential downside from its current trading price.
  • Q3 2024 Earnings Miss: TFI International reported earnings of $1.60 per share, missing the Zacks Consensus Estimate of $1.79.
  • Financial Performance: Despite a slight miss in earnings, TFI International saw an increase in operating income to $203.3 million and a significant rise in net cash from operating activities to $351.1 million.

TFI International Inc. (NYSE:TFII) is a key player in the North American transportation and logistics industry. The company provides a wide range of services, including truckload, less-than-truckload, and logistics solutions. TFII competes with other major logistics companies, striving to maintain its position in a competitive market.

On October 23, 2024, Matt Summerville from D.A. Davidson set a price target of $80 for TFII. At that time, the stock was trading at $134.91, indicating a significant price difference of approximately -40.70% from the target. This suggests that the market may have a more optimistic view of TFII's future performance compared to the analyst's expectations.

TFI International's recent Q3 2024 earnings call, led by CEO Alain Bedard, attracted attention from major financial institutions like Morgan Stanley and Goldman Sachs. Despite the interest, TFII reported earnings of $1.60 per share, missing the Zacks Consensus Estimate of $1.79. This slight improvement from last year's $1.57 per share did not meet market expectations, as highlighted by Zacks.

The company reported an operating income of $203.3 million, up from $200.6 million in the previous year. This growth was driven by business acquisitions, though it was partially offset by weaker market conditions. Net income for the quarter was $128 million, down from $133.3 million in Q3 2023, but adjusted net income rose slightly to $136.6 million.

TFI International saw a significant increase in net cash from operating activities, reaching $351.1 million, up from $278.7 million in Q3 2023. Free cash flow also improved to $272.5 million, with over $130 million used to repay debt. The Board approved a quarterly dividend of $0.45, a 13% increase, reflecting the company's commitment to returning value to shareholders.

TFI International’s Investor Day Review

RBC Capital analysts provided their views on TFI International Inc. (NYSE:TFII) following the company’s Investor Day, during which it provided long-term 10-year margin targets for each business segment, discussed capacity and strategy toward M&A as well as outlined its various business segments.

According to the analysts, the consolidated O/R guide was notable in that it represents EPS growth of approximately 25% to be achieved in the medium term. Moreover, management highlighted $5 billion worth of dry powder for large-scale M&A should the opportunity present itself. According to the analysts, capital to this order of magnitude is meaningful, and (combined with the company’s track record thus far) quite compelling.