BMO Capital Markets has maintained its Market Perform rating on shares of TFI International (NYSE: NYSE:TFII) with a price target of $155.00.
The firm's position is based on a sum-of-the-parts analysis which suggests that the current stock valuation for TFI International already accounts for expected improvements in the company's performance, including a substantial decrease in the U.S. Less-Than-Truckload (LTL) operating ratio to the mid to low 80% range.
The analyst from BMO Capital Markets highlighted that the potential for further stock appreciation is linked to TFI International's future mergers and acquisitions (M&A), an area where the company's management has demonstrated a successful track record.
However, the current market conditions, characterized by low visibility into a freight cycle recovery and a limited margin of safety in the stock's valuation, warrant a cautious stance, leading to the decision to maintain a Market Perform rating.
TFI International's current stock price incorporates an optimistic scenario for future growth, according to the analysis. The company's U.S. LTL operating ratio—a key metric that compares operating expenses to net sales—is expected to improve significantly, which is a positive indicator of operational efficiency.
In other recent news, TFI International's second quarter earnings exceeded expectations, leading to a revised price target by TD Cowen from $176 to $184. The company also confirmed its full-year earnings guidance.
RBC Capital Markets similarly raised its target for TFI International to $171, citing strong Q2 performance and potential for future acquisitions. However, BMO Capital Markets lowered its stock price target to Cdn$140.00 from Cdn$145.00, reflecting challenges in the freight market affecting the company's first-quarter performance.
TFI International reported a robust Q2 with an operating income of $208 million and an adjusted net income of $146 million. The company's revenue before fuel surcharge reached $1.96 billion.
Despite the challenging freight market, the company's management has confirmed the guidance for 2024, signaling confidence in their strategic cost management and disciplined approach to handling volumes. The company also plans to pay down significant debt in the coming year.
InvestingPro Insights
Recent data from InvestingPro provides a deeper dive into TFI International's financial health and performance. Notably, the company has a market capitalization of approximately $0.98 billion and is trading at a Price/Earnings (P/E) ratio of 25.11, which adjusts slightly to 25.48 when looking at the last twelve months as of Q2 2024. This indicates a valuation that is in line with earnings, albeit on the higher end. The Price/Book ratio for the same period stands at 4.51, suggesting that investors are willing to pay a premium over the company's book value.
TFI International's revenue growth for the last twelve months as of Q2 2024 is modest at 2.23%, with a more significant quarterly increase of 26.42% in Q2 2024. This growth is reflected in a gross profit margin of 21.03%, demonstrating the company's ability to maintain profitability. Additionally, the company has sustained dividend payments for 23 consecutive years and shows a dividend yield of 1.14%, which is a testament to its commitment to shareholder returns.
InvestingPro Tips highlight that analysts have recently revised their earnings expectations upwards for the upcoming period, and the stock is currently in oversold territory according to the Relative Strength Index (RSI). These insights suggest potential for a rebound in the stock price. Furthermore, with a track record of low price volatility and a strong return over the last decade, TFI International could be appealing for investors seeking stability and consistent performance. For those interested in further analysis and additional tips, there are more insights available on InvestingPro's platform, including a fair value estimate of $155.32, which closely aligns with the BMO Capital Markets price target.
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