TFI International To See Soaring Volume Stemming From Potential Restructuring Of Yellow Corp: Analyst

BMO Capital Markets analyst Fadi Chamoun reiterated the Market Perform rating on TFI International Inc. TFII, raising the price target to $125 from $105.

The analyst thinks that LTL stocks will continue to trade at elevated levels as investors assess a potential downsizing of Yellow Corporation YELL. The analyst notes that YELL will undergo a restructuring that results in lower industry capacity and freight diversion to other LTL networks. 

The analyst thinks TFI International is well-positioned to capitalize on the U.S. LTL Industry disruption.

Chamoun believes that TFII could see outsized U.S. LTL volume tailwinds in YELL restructuring, given its similar low weight/shipment freight profile and available network capacity. 

The analyst believes LTL industry prices could increase by the mid-single digit in a mild disruption scenario and as much as high-single-digit or low-teens in a deeper capacity downsizing.

The analyst notes that in a YELL restructuring under a bankruptcy scenario where volume and price impact may be more significant, the upside scenario for TFII could support the valuation of up to $150. 

The YELL restructuring provides TFII's U.S. network with an opportunity to improve density and operating margins without resorting to M&A, Chamoun adds. 

However, not being a pure play LTL, valuation upside is likely more modest relative to peers, the analyst adds. 

For FY23, the analyst expects TFII revenues to fall 13.2% to $7.65 billion, with adjusted EPS slumping 17.6% to $6.61.

Price Action: TFII shares are trading higher by 0.71% to $123.48 on the last check Tuesday.