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On Friday, UBS analysts downgraded TFI International (NYSE:TFII) stock, moving from a "Buy" to a "Neutral" rating, accompanied by a significant reduction in the price target from $163.00 to $107.00. The downgrade was prompted by concerns over the company’s US Less-Than-Truckload (LTL) business margin improvements. The stock has already fallen 21.3% in the past week, trading near its 52-week low of $100.77. According to InvestingPro data, the company currently appears undervalued based on its Fair Value analysis.
The UBS analysts cited a lack of visibility towards a significant margin improvement in TFI International’s US LTL operations. They pointed to the 4Q24 operating ratio in the US LTL segment, which deteriorated by 630 basis points year-over-year, reaching 97.3%. Despite these challenges, InvestingPro data shows the company maintains a "GOOD" Financial Health score, with a gross profit margin of 20.6% and revenue growth of 11.64% over the last twelve months. The analysts noted a year-over-year decline in shipments of 6.0%.
The downgrade reflects UBS’s diminished confidence in TFI International’s previously anticipated margin improvements, which had been considered a key driver of earnings per share (EPS) growth. The analysts’ outlook changed following TFI’s fourth-quarter performance, which fell short of expectations, and the company’s own commentary about ongoing challenges expected in the first half of 2025.
TFI International’s weaker-than-expected fourth-quarter performance and the forecasted difficulties in the near term have led UBS to adjust their expectations for the company’s financial trajectory. The revised price target of $107.00 represents a notable decrease from the prior target, indicating a recalibration of the stock’s anticipated value based on the latest operational insights.
The UBS analysts’ report concludes with an emphasis on the change in their investment thesis for TFI International. The lack of confidence in the US LTL margin improvement as a catalyst for EPS growth has resulted in a more cautious stance on the stock’s outlook. InvestingPro reveals that six analysts have recently revised their earnings downwards, though the company is still expected to remain profitable with a forecasted EPS of $7.06 for FY2025. For deeper insights into TFI International’s valuation and future prospects, investors can access the comprehensive Pro Research Report, available exclusively to InvestingPro subscribers.
In other recent news, TFI International has reported its fourth-quarter earnings for 2024, which showed a significant decline. The company’s adjusted earnings per share (EPS) came in at $1.19, a 30% decrease from the prior year, and below the projections of both BofA Securities and the consensus estimate. This shortfall was largely due to underperformance in the Less-than-Truckload (LTL) segment, particularly within the U.S. operations. BofA Securities responded by downgrading TFI International’s stock rating from Neutral to Underperform and lowered the price target to $109, citing escalating costs and stagnant earnings projections for 2025.
Additionally, TFI International announced an increase in its quarterly dividend to $0.45 per share, a 13% rise from the previous dividend, indicating confidence in its financial stability. Despite the challenging outlook, the company remains committed to returning value to its shareholders. Meanwhile, Stifel analysts issued a cautious outlook on the U.S. transport sector, highlighting potential risks such as inflation and geopolitical tensions that could affect companies like TFI International. These developments illustrate the complex environment TFI International is navigating, with both internal challenges and broader industry uncertainties.
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