Desjardins Securities analyst Benoit Poirier said he’s “very pleased” with TFI International Inc. after Tuesday’s release of its “impressive” fourth-quarter financial results, believing it demonstrated “once again” that it’s “ideally positioned to unlock value for shareholders.”
“With the integration of UPS Freight now well underway, management is warming up for another large LTL [less-than-truckload] acquisition in late 2022/early 2023, which would unlock further value from the acquired assets in the U.S.,” he said. “This is a compelling proposition at these levels as investors are not paying for this potential upside. TFII remains our preferred transportation stock for 2022.”
For the quarter, TFI reported total revenue of US$2.141-billion, exceeding both Mr. Poirier’s US$2.043-billion estimate and the consensus forecast of US$2.022-billion. Adjusted fully diluted earnings per share of US$1.57 also topped projections (US$1.18 an US$1.25, respectively).
Mr. Poirier also sees TFII’s 2022 guidance as “conservative,” seeing “more upside with share buybacks, tuckin acquisitions and successful UPS Freight integration.
“TFII remains quite bullish for 2022 and potentially for 2023 as well, noting that supply chain disruptions, driver shortages and chip shortages would remain key tailwinds for the sector,” he said. “Management is now targeting adjusted fully diluted EPS of US$6.25–6.50 in 2022 (up from US$5.23 in 2021; consensus was US$5.99 vs our initial forecast of US$5.94). Guidance excludes unannounced M&A and share buybacks.”
“UPS Freight acquisition surprises once again [leading to] further confidence that the business can generate 80-per-cent adjusted OR [operating ratio] by 2024. The division reported an impressive adjusted OR of 89.4 per cent (we expected 93.7 per cent). Recall that management had guided to 94–95 per cent in 4Q, demonstrating the early success of the integration. Management is confident that its extensive integration plan will help drive an adjusted OR of 85–88 per cent for the division by the end of 2022 (annualized run rate). Management is also confident that the division can generate an adjusted OR of 80 per cent within the next 24–36 months.”
After raising his earnings expectations through 2024, Mr. Poirier raised his target for TFI shares to $173 (Canadian) from $161, reiterating a “buy” recommendation. The average target on US$127.22.
Other analysts making target adjustments include:
* National Bank Financial’s Cameron Doerksen to $160 from $153 with an “outperform” rating.
“We continue to see strong earnings growth supported by ongoing margin improvement at the company’s U.S. LTL segment as well as supportive end markets that we believe will persist through 2022 at least,” he said. “Valuation also remains attractive with TFII trading at 13.5 times P/E based on our 2023 forecast versus the weighted average comparable multiple of 14.9 times.”
* RBC’s Walter Spracklin to US$125 from US$124 with an “outperform” rating.
“TFII delivered a strong Q4 that was well above expectations; and later on the call management provided new 2022 guidance that was also solidly above (and ultimately may prove conservative),” he said. “While meaningful deals were deferred 12-18 months, we like management’s strategy to focus on the significant market opportunity that currently exists — particularly around price, growth and continued synergy capture from ongoing integration. We view this strategy as having inherently lower risk, and we view it favorably as a result. TFII remains a top idea.”
* Scotia Capital’s Konark Gupta to $165 from $150 with a “sector outperform” rating.
“TFII was up 8 per cent today on the back of solid Q4 beat and better-than-expected guidance which is not surprising given the stock was down 14 per cent year-to-date heading into the results,” he said. “We continue to like the stock with a Sector Outperform rating for continued solid double-digit EPS growth potential despite cycle risks. We have raised our 2022 estimated EPS to near the top end of ‘conservative’ guidance while also increasing our 2023 EPS and introducing our 2024 for a projected 19-per-cent organic EPS CAGR [compound annual growth rate] through 2024.
* Cowen and Co.’s Jason Seidl to US$139 from US$127 with an “outperform” rating.
* JP Morgan’s Brian Ossenbeck to US$134 from US$130 with an “overweight” rating.