In the bustling world of transportation and logistics, TFI International (TSX:TFII) has long been a stalwart, steering through the highways and byways of North America with commendable prowess. Yet, even the most seasoned drivers encounter bumps in the road.
Recently, TFI’s stock took a notable detour, sliding from its 52-week high of $220.93 to a low of $126.24. A decline of approximately 43%. This downturn has left investors pondering: Is this a temporary pit stop or a sign to reroute their investment strategies?
Looking at the numbers
To figure out whether this Canadian stock is a long-term winner or a dud, let’s dig into the numbers. The company’s fourth-quarter earnings report shed some light on this journey. Total revenue revved up to $2.08 billion, a modest increase from $1.97 billion in the same quarter the previous year. However, operating income hit a speed bump, decelerating to $160.2 million from $198.3 million. Net income also took a detour, dropping to $88.1 million from $131.4 million year over year.
A significant factor in this earnings dip was the underperformance of TFI’s U.S. less-than-truckload (LTL) operations. The segment faced challenges with deteriorating operating ratios and increased accident-related expenses. These rose by $8 million compared to the prior year.
Moving south?
In an ambitious move, TFI announced plans to shift its legal domicile from Montreal to the United States, thereby aiming to align better with its predominantly American operations and shareholder base. However, this plan hit a roadblock due to concerns from U.S. investors about potential impacts on their holdings. This led TFI to put the relocation on ice — at least for now.
Despite these detours, TFI remains committed to rewarding its shareholders. The board approved a 13% increase in the quarterly dividend, bumping it up to $0.45 per share. This move underscores the company’s confidence in its long-term trajectory, even amidst some fairly hectic short-term challenges.
What to watch
Looking ahead, analysts have mixed feelings about TFI’s route. Some express concerns over the Canadian stock’s ability to improve margins in its U.S. LTL business. Meanwhile, others remain optimistic, citing TFI’s solid fundamentals and growth potential. The consensus price target stands at $147.21, reflecting a cautiously optimistic outlook.
For long-term investors, TFI’s current stock price may represent a scenic overlook — a chance to appreciate the company’s resilience and potential for future growth. With a forecasted earnings growth rate of 19.3% per year, TFI’s engine seems primed for acceleration once the current roadblocks are navigated.
Bottom line
In conclusion, TFI International encountered some potholes recently. Yet its strong fundamentals, strategic initiatives, and commitment to shareholders suggest that this detour could be an opportunity for investors with a long-term horizon. In fact, with shares currently near 52-week lows, and the Canadian stock cancelling the move south, the stock looks undervalued — even oversold. As with any journey, it’s essential to keep an eye on the road ahead and adjust your route as necessary. But for investors eyeing a long-term investment, TFI stock could just be one to add to your radar.
