RBC April 16, 2024
Transports: Cdn. Trucking and Diversified Industrials
Q1/24 Preview
RBC Compass
Our view: In this report, we update our Q1 estimates for recent trends and our own channel checks. Overall, volume indications from US transports and Canadian rail carload data highlight a weak environment in Q1. In addition, truck pricing was soft; however, we are seeing evidence the market is steadying, indicating we may be nearing a bottom. We adjust our Q1 estimates for weaker than expected truck pricing at MTL and TFII and we leave our estimates unchanged at AND, CJT, SJ, and WTE. See Exhibit 3.
Key drivers expected to impact Q1 reporting. We expect visibility into the freight demand outlook (for CJT, MTL and TFII) to be the main focus in Q1. In addition, we believe M&A pipelines will drive sentiment for AND, MTL and TFII, and highlight utility pole demand and pricing as well as margin as a discussion point for SJ. Finally, specific to TFII, an update on the integration of TForce Freight and Daseke will be of interest.
Best-positioned stocks going into Q1 reporting
• CJT: Q1 estimate unchanged and slightly above consensus; price target remains at $184; maintain Outperform. Our Q1 Adj. EBITDA estimate remains unchanged at $78MM, slightly above consensus $76MM due to strong January trends that suggest upside to current consensus. Our 2025 estimate stands at $368MM, ahead of consensus $344MM, on what we see as increasing eCommerce penetration and better margins driven by improving capacity utilization.
Neutral / Weaker positioned stocks going into Q1 reporting
• AND: Q1 estimate unchanged and a touch ahead of consensus; price target remains at $43; maintain Sector Perform. Our Q1 EBITDA estimate remains at $44MM, a touch ahead of consensus $43MM. Our Q1 EBITDA estimate is for y/y growth of +9% on better margins.
-
MTL: Q1 estimate lower and in line with consensus; price target remains at $17; maintain Outperform. Our Q1 EBITDA estimate moves lower to $79MM (from $83MM), in line with consensus $79MM, due to a weaker than expected truckload environment. Our 2024 EBITDA estimate remains at $338MM, in line with consensus $338MM but ahead of management’s target for EBITDA of $325MM, which we view as including conservatism and which does not include M&A.
-
SJ:Q1estimateunchangedandaboveconsensus;pricetargetremainsat$94;maintainOutperform. Our Q1 EBITDA estimate remains at $135MM, above consensus $132MM on margin reflecting our view that pole pricing will remain strong in line with Q4 trends. Our 2024 and 2025 organic pole sales growth estimates of +11% and +18%, respectively, are in line with the company’s target for +15% poles sales CAGR 2023 to 2025.
-
TFII: Q1 estimate lower; price target higher to US$173 (from US$155); maintain Outperform. Our Q1 EPS estimate moves lower to $1.34 (from $1.52), below consensus $1.40, to reflect our assumption for lower truck pricing in Q1. Our price target increases, however, to $173 (from $155) on our higher multiple of 16.5x (from 14.5x), which we flag is in line to below US peers. We expect focus into the quarter to be on the Daseke acquisition, impact from the Yellow shutdown, especially as Yellow terminals begin to be brought back on line following an auction last year.
-
WTE: Q1 estimate unchanged and below consensus; price target remains at $27; maintain Sector Perform. Our Q1 EBITDA estimate is unchanged at $43MM below consensus $45MM. Our 2024 EBITDA estimate remains at $173MM below consensus $183MM on the view that margins will be affected by the potash project and wage inflation. Our 2024 throughput estimate of 26Mt is a touch ahead of guidance for volumes of 25.5Mt.