As we approach 2025, Tax-Free Savings Account (TFSA) investors looking for undervalued stocks with strong recovery potential should consider TFI International (TSX:TFII) and Bombardier (TSX:BBD.B). Both TSX stocks have faced challenges but are showing signs of resilience, making them compelling picks before they fully bounce back.
TFII
TFI International, a major player in transportation and logistics, has been navigating a tough freight market. In the third quarter (Q3) of 2024, the TSX stock reported operating income of $203.3 million, slightly up from $200.6 million a year prior. This growth was supported by strategic acquisitions, helping offset weaker freight demand. However, net income dipped to $128 million from $133.3 million in the same quarter last year, reflecting ongoing industry headwinds.
Despite this, adjusted net income improved slightly, reaching $136.6 million compared to $136 million in Q3 2023. More importantly, TFI generated strong cash flow, with net cash from operating activities rising to $351.1 million from $278.7 million, showcasing the TSX stock’s ability to maintain financial stability even in a weaker economic environment.
While earnings pressure remains a concern, TFI’s ability to grow its top line suggests it is well-positioned for a rebound once market conditions improve. The company’s long-term strategy of acquiring and optimizing freight businesses should continue to drive efficiencies, making it a solid investment for those willing to hold through short-term turbulence.
Bombardier
Bombardier has been making significant strides in the business jet market. The company’s third-quarter 2024 earnings revealed strong revenue growth, with sales reaching $2.07 billion, well above analyst expectations of $1.79 billion. A key driver of this performance was its services segment. This saw a 28% increase to $528 million as demand for jet parts and maintenance remained robust. Despite an 18-day strike at one of its Canadian facilities, Bombardier managed to deliver 30 jets during the quarter, only slightly below the 31 delivered in the same period last year. The TSX stock maintained its full-year forecast of 150 to 155 aircraft deliveries, signalling confidence in its production capabilities.
Financially, Bombardier faced some challenges, including a cash burn of $127 million in Q3. This is a reversal from the $80 million in positive cash flow generated a year ago. However, its adjusted earnings per share (EPS) came in at $0.74, slightly surpassing the expected $0.73. This indicates operational efficiency and suggests that, despite near-term pressures, Bombardier is executing well on its growth plans. With strong demand for business jets and a steady order backlog, the TSX stock remains well-positioned for a recovery as economic conditions stabilize.
A winning pair
For investors looking to position their TFSA for 2025, both TFI International and Bombardier offer attractive entry points. TFI is trading below its 52-week high. And as freight demand picks up, its strong cash flow and acquisition strategy should drive long-term growth. Bombardier, meanwhile, continues to benefit from a strong private aviation market, and its improving financials suggest further upside potential. While both stocks may face short-term volatility, long-term growth prospects make them worthy considerations for investors willing to ride out the bumps.
The key to investing in these companies is patience. TFI International’s ability to weather industry downturns through acquisitions and cost efficiencies makes it a steady long-term bet. Bombardier’s growing demand for private jets should help sustain revenue growth even in uncertain economic conditions. Both TSX stocks are well-managed and positioned to thrive as their respective industries recover.
With 2025 around the corner, now may be an opportune time to add these TSX stocks before they begin the next upward climb. Whether you’re looking for a steady cash flow business like TFI or a high-growth turnaround story like Bombardier, both TSX stocks offer compelling reasons to invest before the market fully recognizes their potential.
