TFI International Inc TFII

Primary Symbol: T.TFII

TFI International Inc. is a transportation and logistics company, operating across the United States and Canada through its subsidiaries. The Company's segments include Package and Courier, Less-Than-Truckload, Less-Than-Truckload, and Logistics. The Package and Courier segment is engaged in pickup, transport, and delivery of items across North America. The Less-Than-Truckload segment is engaged in pickup, consolidation, transport, and delivery of smaller loads. The Truckload segment is a provider of conventional and specialized truckload services, including flatbed, tanks, dumps, and oversized. It offers specialized trailers, and a million-plus square feet of industrial warehousing space. The Logistics segment provides asset-light logistics services, including brokerage, freight forwarding and transportation management, as well as small package parcel delivery. The Company also specializes in hauling compostable and recyclable materials and in residential waste management.

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TFI International Inc

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Post by retiredcfon Aug 10, 2021 10:05am

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TD Notes

Key Trends from Trucking Comps Q2 Results TD Investment Conclusion

Several of TFI's comparables (Knight Swift - KNX, Old Dominion - ODFL, Schneider - SNDR, Saia - SAIA and Yellow - YELL), and TFI, reported Q2/21 results recently (Exhibit 1). Revenue and earnings were in-line or better-than-expected. We believe that widely discussed industry capacity constraints are providing a net benefit to profitability. Tight capacity is due to strong demand from the economic recovery and e-commerce growth while labour shortages and other supply chain challenges throughout many freight modes are impacting supply. This is leading to strong yields but also cost inflation, particularly labour costs. Overall, the results support our positive view of TFI, and our expectation that its acquisitions, willingness to shed unprofitable business, and diversified exposure to e-commerce, industrial activity, and a recovery in B2B will lead to continued margin expansion and earnings growth. LTL market indicators are taking on additional relevance as it is now its largest segment (38% of 2021 forecast revenue) following the acquisition of the UPS Freight.

Strong volume:

SNDR believes that it will take a demand-driven shock to derail the strength in the trucking industry.
ODFL revenue per day is up 35% y/y in July due to a combination of strong yield and tonnage growth, although y/y revenue comps get tougher for the balance of Q3. Management expects continued strength in e-commerce volume.
SAIA is planning to expand its service center network aggressively over the next few years to support expected growth in freight volume.

Tight capacity:

YELL noted that the industry-wide shortage of qualified drivers and dock workers is constraining trucking capacity. YELL is leaning into yield growth over tonnage growth to help manage the impact. Pricing trends remain favourable, with 11-12% pricing growth on contract renewals in July.
There are delays in equipment deliveries which are forcing ODFL to operate older units that were destined for replacement. The market continues to be very tight, and current demand trends are expected to continue into 2022.
TFI reduced 2021 capex plans due to a delay in new truck deliveries that are expected to shift into 2022.
SNDR noted the growth in its Logistics segment as providing an offset for some of the driver capacity challenges in its network.

Inflation and Labour Availability:

ODFL's average number of full-time employees increased 21% y/y (more than 1,100 employees) in Q2, and company intends to hire an additional 1,000 employees throughout Q3 to support expected growth.
SAIA is seeing a tight labour market and lingering employee challenges due to the pandemic, forcing it to offer hiring and referral bonuses. These higher costs are at least somewhat being passed on to customers.