Is TFI Stock a Buy in September 2023?

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In the ever-evolving landscape of the TSX today, investors are presented with a multitude of opportunities. However, one sector that has shown remarkable resilience and growth is the transportation and logistics industry. Today, we delve into TFI International (TSX:TFII), a prominent player in this sector. Here, we’ll evaluate whether it warrants consideration in your investment portfolio.

A look at TFI International’s recent performance

TFII stock has been on a remarkable journey in recent times, reflected in its impressive share price movement. At the time of writing, TFI stock is scaling new heights. It trades at approximately $184 per share, up significantly from $136 at the beginning of 2023. This represents a remarkable increase of approximately 35%.

Furthermore, TFII stock offers a dividend yield of 0.99%, providing investors with a modest income stream. With a price-to-earnings (P/E) ratio of 18.92, the stock appears reasonably valued in comparison to its industry peers. This combination of strong share price appreciation, a consistent dividend, and a fair P/E ratio makes TFII stock an enticing prospect for investors seeking both growth potential and income.

Analyzing TFI International’s earnings

To gain insight into TFII stock’s present financial health, we need to scrutinize its recent earnings performance. In the second quarter of the year, TFII stock reported operating income of $192.4 million, down from $391.0 million in the same quarter the previous year. This decline can be attributed to reduced freight volumes and various non-recurring costs. This includes a reduction in gains from real estate sales and unfavourable currency translation impacts.

While net income for the second quarter (Q2) was $128.2 million, down from $276.8 million in Q2 2022, adjusted net income stood at $138.9 million compared to $241.1 million in the prior year. This decrease in net income can largely be attributed to the aforementioned factors as well as the divestiture of its CFI business.

In terms of earnings per share (EPS), TFII tock reported diluted EPS of $1.47 in Q2, down from $3 in Q2 2022. However, when considering adjusted diluted EPS, the figure was $1.59, showing resilience in the face of challenging circumstances. Moreover, the company reported net cash from operating activities of $200.4 million. While lower than the previous year, this reflects a strong cash flow position.

It’s worth noting that the board of directors recently approved a 30% increase in the quarterly dividend. This demonstrates confidence in the company’s ability to weather short-term challenges and generate long-term value for shareholders.

TFII stock’s future outlook

To assess the potential of TFI International stock as an investment today, it’s crucial to look at its future outlook. The company recently made a significant announcement regarding its acquisition of JHT Holdings, a leading asset-light logistics and transportation provider. This acquisition positions TFII stock to tap into Class 6-8 truck manufacturers’ transportation needs. It enhances its service offerings and expands its footprint in North America.

JHT’s operations, involving the transport of new trucks from manufacturing plants to dealers and customers, generate annual revenues exceeding $500 million. The transaction is expected to yield revenue and cost synergies with TFI International’s existing operations. This will ultimately contribute positively to its financial performance.

In the words of Alain Bédard, chairman, president, and chief executive officer of TFI International, “We were immediately impressed by JHT’s well-run operations, its asset-light approach, and leadership in this differentiated niche market.” This acquisition is a testament to TFI International’s strategic vision and commitment to sustainable growth. Shares popped up by 8% at the news of the acquisition.

Bottom line

In conclusion, TFII stock is a compelling choice for investors seeking exposure to the transportation and logistics industry. Its recent share price movement, solid dividend yield, and reasonable valuation indicate the potential for attractive returns.

While recent earnings were impacted by various factors, the company’s strategic acquisition of JHT Holdings positions it for future growth and profitability. TFII stock’s ability to adapt and expand in the dynamic logistics industry makes it a stock worthy of consideration for today’s investors. However, as with any investment decision, thorough research and consideration of your individual financial goals and risk tolerance are essential before making a purchase.

The post Is TFI Stock a Buy in September 2023? appeared first on The Motley Fool Canada.

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Fool contributor Amy Legate-Wolfe has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.