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Tuesday, Citi analysts adjusted their outlook on TFI International (NYSE:TFII), reducing the price target from $162.00 to $130.00 while maintaining a Buy rating on the stock. This change comes after TFI International reported a quarter that fell short of expectations, with earnings per share (EPS) dropping by 30% year-over-year and the U.S. less-than-truckload (LTL) adjusted operating margin shrinking to just 2.7%, representing a 630 basis points decline from the previous year. According to InvestingPro data, nine analysts have recently revised their earnings estimates downward, with analyst targets now ranging from $105 to $180.
Shares of TFI International have plummeted nearly 30% since the earnings report, indicating investors’ concerns that there may be deep-rooted issues within the company, particularly with its TForce Freight division. TForce Freight, which TFI acquired from UPS in 2021, has been a consistent challenge for the company. InvestingPro analysis indicates the stock is currently trading near its 52-week low, with technical indicators suggesting oversold conditions. Despite these challenges, the company maintains strong fundamentals with a P/E ratio of 16.1x and an EV/EBITDA of 9.5x.
Despite the recent downturn, TFI International’s long-term performance remains noteworthy. The company’s stock has seen compounded annual growth rates of 15% and 21% over the past five and ten years, respectively. Citi’s analyst highlighted the leadership of CEO Alain Bedard, describing him as a competent operator and adept at acquisitions.
TFI International’s current market capitalization stands at approximately $7.6 billion. With a projected free cash flow of $750-$800 million even at the low point of the business cycle, the company’s shares are considered undervalued. The analyst noted that there is potential for the stock to rise with macroeconomic improvements. However, they also emphasized that there is significant risk associated with executing the turnaround strategy for TForce Freight.
In other recent news, TFI International has faced a series of analyst downgrades and price target reductions due to operational challenges and financial performance concerns. UBS downgraded TFI International from "Buy" to "Neutral," slashing the price target from $163 to $107, citing a lack of visibility in margin improvement within the US Less-Than-Truckload (LTL) segment. BofA Securities also downgraded TFI International from "Neutral" to "Underperform" and lowered the price target to $109, attributing the change to escalating costs and stagnant earnings projections for 2025. TD Cowen, while maintaining a "Buy" rating, adjusted its price target from $165 to $135 due to significant operational challenges at TForce Freight, a subsidiary of TFI International.
The company’s recent fourth-quarter earnings report revealed a 30% year-over-year decrease in adjusted earnings per share to $1.19, missing both BofA Securities’ projection of $1.53 and the consensus estimate of $1.58. The performance of TFI International’s LTL segment, particularly the U.S. operations, was a major contributor to the earnings miss. The U.S. LTL adjusted operating ratio worsened to 97.3%, reflecting a significant year-over-year decline. Additionally, TFI International’s Ground Freight Pricing revenue, tied to its acquisition of UPS Freight, fell 58% from the previous year. Analysts have expressed concerns over TFI International’s ability to improve margins and earnings, with UBS highlighting a decline in shipments and BofA Securities noting the loss of profitable small- to medium-sized business customers.
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