DesjardinsDesjardins Securities analyst Benoit Poirier warns TFI International Inc.’s second-quarter results are likely to hurt by a “weaker than initially expected” seasonal pick-up in less-than-truckload activity, pointing to “depressed” truckload data and “uninspiring” operating updates from its peers.
“We believe TL spot rates will be a key indicator of an inflection in LTL stocks,” he said. “Unfortunately, U.S. TL spot rates continue to bounce along the bottom at US$2.05/mile, according to the latest DAT data. From a capacity perspective, there remain 92,000 more for-hire carriers in the US than existed pre-pandemic according to FTR, and on a seasonally adjusted basis, truck payrolls have declined just 2 per cent relative to the peak in July 2022. Overall, we continue to believe capacity exits will be a gradual process, and investors should not expect a sharp turnaround before year-end. “With the exception of SAIA which posted strong tonnage growth (less of a read-through for TFII given its idiosyncratic growth from new facilities and Yellow volume), May operating updates from ODFL, XPO and ARCB underperformed typical seasonality in our view, despite lapping easy yearago comps. Combined with the ISM Manufacturing PMI coming in below 50 once again in May, we do not expect a material increase in TForce’s shipment count in 2Q. However, we look forward to analyzing the company’s progress on the weight front following four consecutive quarters of sequential expansion.”
While Mr. Poirier trimmed his second-quarter and full-year 2024 earnings expectations, he does not expect TFI’S management to cut its 2024 annual guidance, and he thinks the lower end of its US$6.75–7.00 guidance range “remains achievable.” He’s now projecting US$6.76, down from US$6.81.
Maintaining a “buy” rating for TFI shares, he trimmed his target to $207 from $208. The average is currently $196.79.
“We see sizeable potential opportunities for value creation given the catalysts on the horizon (eg TL spin-off, M&A, room for operational streamlining, dividends and buybacks),” said the analyst.