On Monday, BofA Securities adjusted its outlook on TFI International (NYSE:TFII), a North American transportation and logistics company. The firm's analyst reduced the price target to $148 from the previous $166 while maintaining a Neutral rating on the stock. This adjustment follows TFI International's first-quarter earnings for 2024, which fell short of expectations.
TFI International reported an adjusted earnings per share (EPS) of $1.24 for the first quarter of 2024, marking a 7% decline year-over-year. The reported EPS was below both BofA Securities' estimate of $1.45 and the consensus estimate of $1.36. The shortfall was primarily attributed to the company's non-Less-than-Truckload (LTL) segments, including Truckload, Package & Courier, and Logistics, which did not meet the firm's targets.
The Truckload segment, accounting for 25% of the company's revenue, underperformed expectations by $0.08 per share, while Package & Courier and Logistics segments fell short by $0.06 and $0.05 per share, respectively. The analyst noted that the weakness in these areas reflects broader market challenges seen in early first-quarter earnings from other industry players such as J.B. Hunt Transport and Knight-Swift, which have been facing extended rate and demand pressures due to a prolonged freight downcycle.
Despite these challenges, Alain Bédard, CEO of TFI International, commented on the company's resilient performance. He emphasized the ongoing turnaround of TForce Freight, the U.S. LTL segment formerly known as UPS Freight, which is reaching an inflection point. The company's U.S. LTL tons per day increased by 7% year-over-year, surpassing the firm's estimate of a 3% increase. This rise was driven by a strategic focus on adding heavier-weighted freight, with pounds per shipment up 13% year-over-year, which is still about 10% below the industry average.
However, the company's U.S. LTL damage claims ratio saw a deterioration from 0.5% in the fourth quarter of 2023 to 0.7% in the first quarter of 2024. This indicates that service recovery for TFI International will likely be a gradual process. Bédard also noted that compared to Old Dominion's 30% excess capacity, TFI International's U.S. LTL has a 35% excess capacity, which they plan to reduce to 15% over the next two to four years with concerted efforts on density, mix, service, and pricing strategies.
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