TFI International (TSX: TFII) stock has been on quite a tear in 2023. Shares are up 17%, coming down only slightly in the last few months after second-quarter earnings. Even still, the stock continues to be far higher than the rest of the market. But is that set to continue?
Why the climb?
TFI stock has surged over the last few years with transportation and logistics services across North America. The company provides trucking and shipping management services for companies to ensure consumers get their projects.
And as you’ve likely been aware, this has been in high demand since the pandemic. Supply-chain disruptions and e-commerce demands have left the company scrambling with new deals. Moreover, an economy that sees many businesses looking to cut back on costs has led to TFI stock being used as a lower-cost option compared to purchasing a fleet of shipping vehicles for companies.
But as this became the norm, TFI stock still hasn’t exactly stabilized. Instead, it’s climbed on a fairly steady basis. So, let’s look at earnings to see why.
Second-quarter results
During the second quarter, TFI stock reported operating income of $192.4 million. This was about half of the year before because of reduced freight volumes and non-recurring costs. Therefore, as you can guess, shares dropped from the news.
Net income came in at $128.2 million compared to $276.8 million the year before, along with diluted earnings per share (EPS) at $1.47, down from $3 in 2022. All this, and yet the company still increased the dividend by 30%.
Management believes that the company’s niche positioning puts it up for future longstanding success. It continues to have a strong financial foundation, with a focus on profitability. So, even with the difficult freight market and reduced volumes, TFI stock is convinced that growth will return. This may be through mergers and acquisitions, as the company completed several acquisitions in the last year. This should help continue the growth of its dividend as well. Furthermore, the company plans to buy back shares to boot!
Analysts up for more
Analysts believe that TFI stock is currently undervalued after the recent drop in share price. It now offers a 1.13% dividend yield, with shares trading at 16.57 times earnings. There was certainly a downward revision during the recent second quarter for most analysts. However, others remained firm on an outperformer rating.
In fact, 2023 should top its guidance even with the latest earnings results. While softer freight is coming in, lighter transportation is increasing for the stock. Therefore, there could certainly be an improvement in the company’s near term, with its TForce Freight achieving an even 80% operating ratio in 2024.
Bottom line
While TFI stock isn’t out of the woods yet, it certainly does have some growth in the near future. And while shares are down from 52-week highs, now could certainly be a great time to buy — especially as you can now lock up 30% more in dividend income at a 1.13% yield.
