TSX:TFII - Post Discussion
Post by
retiredcf on Nov 02, 2022 2:54pm
TD Raise Target
TFI International Inc.
(TFII-T) C$120.84
Q3/22; Strategy & Balance Sheet Ready for Uncertain Conditions Event
After market close Thursday, TFI reported Q3/22 adjusted diluted EPS of $2.01 ($2.06 excl. non-recurring), compared with TD/consensus at $1.91/$1.97. Adjusted EBITDA of $348 million ($354 million excl. non-recurring) compared with TD/ consensus at $346/$364 million. Organic revenue growth (incl. fuel surcharges) was 4.7% vs our forecast of 4.9%.
Impact: NEUTRAL
We are maintaining our BUY recommendation and increasing our target to C$180.00 from C$160.00. The increase in our target is due to the shift forward of our valuation period by one quarter combined with slightly higher forecast Adjusted EBITDA and Adjusted EPS. Our higher forecasts are due to the carry forward of a portion of the stronger-than-expected margins in P&C, TL and Logistics. We continue to believe that consumer and economic headwinds could create more challenging operating conditions into 2023. However, we believe that the company-wide strategy of 'freight that fits', its UPS Freight acquisition, new equipment procurement plans and new IT system opportunities will provide significant offsets that limit the downside risk to earnings.
As should have been widely anticipated by the market, the Q3/22 MD&A and conference call noted areas of the business that are beginning to feel the effects of softening economic conditions. We believe that this communication from the company is prudent and will likely continue for the next several quarters, but that investors should focus on how well-positioned the company is to manage through a weak economy and emerge in 2024 with earnings that justify a much higher share price.
We expect that economic uncertainty and equity market concerns regarding the downside risk to earnings in 2023 could impede multiple expansion in the short term. However, we believe that the 30% dividend increase announced in Q3/22, share repurchases, 16% higher adjusted EPS potential in 2024 relative to 2022, and FCF that remains well over $8.00/share will drive multiple expansion and significant share price upside within a 12-month investment horizon.
TD Investment Conclusion
We believe that TFI's valuation relative to comps, above-average historical and forecast growth, prudent financial leverage, and track-record of shareholder value creation support a higher share price and our BUY recommendation.
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