TSX:TFII - Post Discussion
Post by
retiredcf on Apr 29, 2021 8:48am
TD Upgrade
As anticipated. GLTA
TFI International Inc.
(TFII-T) C$104.97
Q1/21; Strong Results With More Opportunities Still to Come Event
TFI reported Q1/21 results after the close on April 27 and hosted a conference call on April 28. Adjusted diluted EPS of $0.77 was ahead of our forecast of $0.62 and consensus of $0.74. Adjusted EBITDA of $176 million compared with TD/consensus at $161 million/$166 million.
Impact: POSITIVE
We are maintaining our BUY recommendation and increasing our target to C$125.00 from C$110.00. Our target price increase is due to higher forecasts and the shift forward of our valuation period by one quarter. Our forecasts increase due to the carry-forward of a portion of the stronger-than-expected margins and revenue in Q1/21.
Despite TFI's strong share price performance year-to-date, we believe that industry pricing, e-commerce growth, opportunities from the DLS acquisition in 2020, and the expected UPS Freight acquisition in Q2/21, along with management's proven attention to margin expansion, FCF, and returns on capital leave further upside potential for shareholders. We believe that continued execution on its proven operational and strategic plan should support its current valuation and help it narrow the discount at which it trades relative to some other best-in-class trucking companies.
TFI is navigating the challenges created by the pandemic and generating very strong results, which should be encouraging for investors looking beyond the pandemic to a more normalized operating environment. Although the pandemic elevated certain B2C e-commerce-driven volume, we believe that the benefits in 2021 and 2022 from an economy emerging from the pandemic on other aspects of TFI's business will more than offset any normalization of B2C volume. We forecast that TFI will generate a 22% Adjusted EBITDA CAGR over the next three years and 25% growth in Adjusted EPS. This growth, combined with short-term earnings momentum, balance sheet deleveraging and further upside to ROIC, support our positive view of the stock.
TD Investment Conclusion
We believe that TFI's above-average historical and forecast growth, prudent financial leverage, and track-record of shareholder value creation justify a moderation in the valuation gap with its comparable group. In addition, we believe that the current environment of strong pricing and consumer demand for goods over services should be constructive for the sector over the next 6-12 months.
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