CIBCHave a US$110.00 target. GLTA
EQUITY RESEARCH
July 28, 2022 Flash Research
TFI INTERNATIONAL INC.
Q2 First Pass: Solid Beat And Increasing The NCIB
Key Takeaway: Positive impact. TFII reported Q2 results that were much
stronger than expected and is looking to up its share buyback program. We
expect the company to officially raise its outlook for 2022 on its earnings
conference call, which is scheduled for July 29 at 8:30 a.m. ET.
Q2 Recap – A Solid Beat: TFII reported solid Q2 results, which were ahead
of expectations. We provide a divisional recap in the exhibit herein.
- Revenue: Net revenue came in at $2.0B, up from $1.7B the year prior
and versus our estimate of $1.9B (cons. $1.9B).
- Operating Income: Operating income came in at $391MM versus
$471MM the year prior. The discrepancy in the Y/Y results reflects the
impact of asset sales and bargain purchase gain which totaled $289MM
in Q2/21. Asset sales totaled $85MM this past quarter. Excluding these
items, adjusted operating income was $306MM in Q2 versus $181MM
the year prior. We were forecasting operating income of $223MM (we
baked in $3MM of asset sales) and consensus was $239MM.
- EPS: Adj. FD EPS came in at $2.61, up from $1.44 the year prior and
versus our estimate of $1.78 (cons. $1.80).
- FCF: FCF (CFO less net capex) in Q2 came in at $310MM, down from
$268MM the year prior versus our estimate of $356MM (cons. $256MM).
The main variance in our estimate versus actual came from negative
networking capital drag.
Small Tuck-in Acquisition In The Quarter: TFII disclosed that it acquired
South Shore Transportation, Cedar Creek Express, and Premium Ventures.
This is in line with TFII’s tuck-in acquisition strategy to drive density and
expand its network reach. TFII spent $34MM in acquisitions in Q2.
Upping The NCIB: TFII is looking to amend its normal course issuer bid
(NCIB) to repurchase for cancellation up to 8,798,283 common shares until
the expiry of the NCIB on November 1, 2022, representing 10% of the
company’s public float of 87,982,839 common shares as of October 22,
2021. The current maximum under the NCIB is 7,000,000 common shares.
As at June 30, 2022, and since the inception of this NCIB, TFII has
repurchased and cancelled 4,365,041 common shares, of which 2,629,441
were repurchased and cancelled in the second quarter. As at June 30, 2022,
there were 89,094,521 common shares of TFI International issued and
outstanding. Given TFII’s FCF generation, strong balance sheet position, and
current valuation, we believe it makes strategic sense to accelerate its
shareholder return program.