Currently have a US$175.00 target. GLTA
TFI INTERNATIONAL INC Q1 First Pass: Below Consensus Expectations But Likely Better
Than Feared
Key Takeaway: Neutral impact. TFII reported Q1 adj. EPS of $1.24 that
were a touch below our expectations ($1.27) and lower than consensus
($1.35). That said, we believe TFII’s results are better than feared as a
number of comps have reported earnings already. The company is hosting
its conference call on April 26 at 8:30 a.m. ET. Dial-in numbers are 1-877-
704-4453 or 1-201-389-0920. We expect the following on the quarterly call:
1) comments on the freight cycle; 2) update on the improvements occurring
within TForce Freight and integration of Daseke; 3) 2024 EPS guidance
which we expect will be $7.00-$7.25 (we are forecasting US$7.18 vs.
consensus at US$7.33); and, 4) commentary on the M&A environment and
capital-allocation plan.
Q1 Recap – Logistics The Main Source Of Negative Variance Versus Our
Expectations: P&C, LTL and TL were broadly in line with our expectations,
while Logistics was the primary source of the negative variance.
- Revenue: Net revenue came in at $1.61B, up from $1.56B the year prior and
versus our estimate of $1.68B.
- Operating income: Operating income came in at $152MM versus $166MM the
year prior. This compares to our estimate of $156MM (cons. $170MM).
- EPS: Adj. FD EPS came in at $1.24, down from $1.33 the year prior and
versus our estimate of $1.27 (cons. $1.35).
- FCF: FCF (CFO less net capex) in Q1 came in at $137MM, down from
$196MM the year prior and versus our estimate of $118MM (cons. $147MM).
U.S. LTL Update: U.S. LTL OR was up Q/Q, coming in at 92.6% in Q1 vs.
91.0% in Q4/23 and versus our forecast of 93.0%. In Q1, shipments totaled
1,386K units, down 5.7% Q/Q from 1,406K in Q4/23 and versus 1,469K the
prior year. Shipments per day were ~21.7K in Q1 versus ~22.7K the prior
quarter and ~23K in Q1/23 and versus our expectations of ~23K. Revenue
per shipment (ex-fuel) was up 2.1% Q/Q and up 11.5% Y/Y in the first
quarter. We had modeled a 3.8% Q/Q decline and 5.0% Y/Y increase. We
would note average weight per shipment came in at 1,209lbs, up 1.8% Q/Q
and up 13.7% Y/Y. This is the fourth quarter in a row that weight per
shipment rose on a sequential basis. Please refer to the table in Exhibit 1 for
more detail.
Tuck-in Acquisitions In The Quarter: TFII noted that it acquired three
businesses in Q1: 1) Sharp Trucking Services that offers bulk transportation
and specialized equipment hauling with a focus on the Canadian mining
sector (reported in TL); 2) Hercules Forwarding that focuses on direct shipper
customers in intra-U.S. and cross-border transportation (reported in LTL);
and 3) LJW Tank Lines that specializes in the transportation of food-grade
liquids between QC, ON and the Northeastern U.S. (reported in TL)
NCIB Activity In Q1: In Q1, TFII did not repurchase any common shares. Its share buyback
program runs from November 2, 2023 to November 1, 2024, authorizing it to repurchase for
cancellation up to a maximum of 7,161,046 common shares. Since the inception of this NCIB,
the company has repurchased and cancelled 785,140 shares.
Balance Sheet Position: At the end of Q1, TFII’s funded debt-to-EBITDA ratio was 1.56x
versus 1.49x last quarter (covenant < 3.50x), and EBITDAR coverage ratio was 5.33x versus
5.65x last quarter (covenant > 1.75x)