TFI Reports Lower Income, Revenue
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TFI International profits slid year-over-year in the three months ending March 31, falling short of expectations, with its top executive saying April 26 that conditions in the quarter were tougher than expected.
The company posted net income of $111.9 million, or $1.27 per diluted share, in the first quarter of 2023, compared with net income of $147.7 million, $1.57, in the year-ago period, it said in an earnings statement after markets closed April 25.
Montreal-based TFI posted adjusted earnings of $116.5 million, or $1.33 per diluted share, in the first quarter, compared with $157.6 million, $1.68, in the year-ago period. Zacks Equity Research’s consensus adjusted forecast for the quarter was $1.46 per diluted share.
TFI’s revenue totaled $1.850 billion in the most recent quarter, compared with $2.192 billion in the year-ago period, it said. Zacks’ consensus revenue forecast for the first quarter was $1.946 billion.
Revenue declined primarily as a result of reduced volumes due to weaker end-market demand as well as the sale of Contract Freighters’ nondedicated truckload business and Mexican nonasset logistics business in August 2022, the company said in the statement. Heartland Express paid $525 million for the assets.
TFI said its less-than-truckload segment posted $690.9 million in revenue in the three months ending March 31, compared with $835.4 million in the year-ago period.
The reasons for the decline in revenue at the LTL unit were twofold, CEO Alain Bédard said during the company’s earnings call April 26, with the macro environment and company-specific issues equally to blame.
TFI’s peers saw a 10% year-over-year decrease in shipments, Bédard said on the call, while the Quebec-based group’s Canadian operations saw a 9% decline and its U.S. operations saw a 20% slump in shipments. The company is making substantial changes at its U.S. LTL unit, including swapping out the Workday software system previously used by TForce Logistics when it was part of the UPS group, he said.
TFI completed its acquisition of UPS Freight in April 2021. The $800 million deal for the UPS division was announced in January 2021.
Further deals are in the works, Bédard said in the statement, adding more detail on the call. TFI is strategically expanding its geographic reach and capabilities.
The generally accepted mergers and acquisition (M&A) modus operandi is to buy on bad news and sell on good news, and there’s lots of bad news at the moment, Bédard said on the call, adding: “We love this environment for M&A.”
TFI expects to spend $300 million on M&A and share buybacks in 2023. Bédard said the company was working on a few things and possibly by the end of 2023 or at the start of 2024 a big deal will be unveiled. TFI expects to announce two smaller deals by the end of 2023 in Canada, he added.
TFI bought intermodal and freight brokerage services provider Axsun for $80 million in February, but Bédard said two other potential deals had fallen through, including one where the father and son at the helm of the target were at loggerheads over the sale.
Meantime, TFI’s truckload business reported revenue of $414.1 million in the first quarter, compared with $515.9 million in the same period 12 months earlier.
There is a lot more price pressure in the truckload segment this year, and the market is very difficult, Bédard said during the call. TFI’s truckload team, he said, had made tremendous efforts in the first quarter, likening their task to pulling water out of rocks. As 2023 progresses there may be a softening in the truckload segment, he said, noting that April was a softer market than expected.
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The company expected the first half of 2023 would see soft market conditions, with better expectations for third and fourth quarters. However, things have changed, because people want to travel rather than spend money on consumer goods or home improvement, he said.
TFI’s logistics arm saw its revenue fall from $435.4 million in the first quarter of 2022 to $355.3 million in the most recent quarter. Its package and courier operations posted revenue of $112.6 million in the first quarter, compared with $124.6 million in the same period a year earlier.
TFI ranks No. 5 on the Transport Topics Top 100 list of the largest for-hire carriers in North America.