TFI International: Missed Earnings, But a Bullish Turnaround in the Works?

The freight sector has been a dumpster fire lately, with companies like TFI International (TFI) reporting a major miss on earnings this quarter. But here’s the twist: the stock is up, not down. Let’s dig into why investors are buying the dip—and whether this could be a steal.

First, the bad news: TFI reported Q1 EPS of $0.76, a 23% miss versus expectations, while revenue of $1.96 billion fell short by 5%. Yikes. The usual suspects—slowing freight volumes, tariff chaos, and a sluggish industrial sector—were to blame. Yet shares jumped 2.6% post-earnings, closing at $78.43. What gives?

The Free Cash Flow Surprise
Here’s where the bulls are roaring: TFI’s free cash flow soared to $192 million, a 40% surge from last year’s $137 million. That’s not a typo. Despite the top-line struggles, the company is nailing working capital management and cutting unnecessary spending. With a 10% free cash flow yield, this isn’t just a survival story—it’s a growth story in disguise.

The Turnaround in the LTL Segment
The real magic is happening in TFI’s U.S. less-than-truckload (LTL) division. After losing market share to rivals, management overhauled leadership, axed unprofitable corporate accounts, and doubled down on small- and medium-sized businesses (SMBs). The result? SMB volumes jumped 2% sequentially, and pricing discipline is finally paying off.

The operating ratio (OR)—a key metric for freight firms—improved to 93.1% in Q1, down from 99% in Q4. Management’s 96% target for Q2 and a sub-90% goal by year-end are now within reach. If they hit those numbers, this division could become a cash cow again.

Why Investors Are Buying Now
- Shareholder-friendly policies: TFI returned $94 million to investors in Q1 via buybacks and dividends. With a 24-year dividend streak, this is a stock that rewards loyalty.
- Tech upgrades paying off: New tools like Optum for route optimization and pricing software are slashing costs.
- Spin-off potential: The company hinted at spinning off its truckload division by 2027, which could unlock hidden value.

The Risks (And Why They’re Manageable)
- Tariff hell: Cross-border freight volumes are down 10-15%, and trade disputes are dragging. But TFI’s focus on domestic SMBs and cost-cutting buys time.
- Overcapacity: Too many trucks in the U.S. market? Maybe, but TFI’s capital spending is down to $200 million this year, versus $300 million before. They’re trimming the fat.
- UPS muscling in: Rivals like UPS are eyeing TFI’s guaranteed freight program (GFP). But TFI’s SMB focus—not a price war—is the right strategy.

The Bottom Line: Buy the Dip, But Set a Stop
TFI isn’t a slam dunk, but it’s a classic Cramer “turnaround” play. The stock trades at just 10x forward free cash flow, which is dirt-cheap for a company this size. The Q2 EPS guidance of $1.25–$1.40 suggests the worst is behind it.

Action Plan: Buy shares near $75–$80, with a stop at $70. If free cash flow stays strong and the LTL OR hits 96% in Q2, this could be a 20%+ winner by year-end.

In a sector where most are losing money, TFI’s discipline and execution make it a rare buy. The earnings miss was a hiccup—not a heart attack. This is a stock to own for the next 12 months. Bullish? Absolutely.

—
Jim (but not really Jim)