TFI International: Leveraging Tech and Cross-Border Dominance for Logistics Leadership

As supply chains stabilize post-pandemic and e-commerce demand surges, TFI International (NYSE: TFII) is emerging as a standout play in North American freight. Combining an asset-light model, a robust cross-border network, and tech-driven operational improvements, TFI is positioned to capitalize on margin expansion and market share gains. Here’s why investors should act now.

Operational Efficiency: A Turnaround in Motion

TFI’s Q1 2025 results revealed a critical shift in its U.S. Less-Than-Truckload (LTL) division, long a drag on profitability. By upgrading Optum linehaul planning software and dynamic pricing tools, the company slashed its operating ratio (OR) to 93.1% from 99% in late 2024. While still above its sub-90% target, this progress signals a turnaround. Management’s leadership overhaul—splitting decision-making into dedicated operations, sales, and finance teams—has injected discipline into the division.

The pivot to small- and medium-sized business (SMB) customers, which now account for 2% sequential volume growth, has stabilized margins. This contrasts sharply with unprofitable corporate accounts, which TFI is methodically exiting. CEO Alain Bédard’s focus on cash flow resilience—free cash flow soared to $192 million in Q1—underscores a strategy prioritizing profitability over growth at any cost.

Cross-Border Dominance: A Strategic Asset-Light Network

TFI’s cross-border logistics network is its crown jewel. The $1.1 billion acquisition of Hercules Forwarding in 2024 added 31 terminals and 210 trucks, bolstering its U.S.-Canada freight capacity. With 69% of revenue tied to the U.S. and 30% to Canada, TFI’s decentralized model—646 facilities, 20,756 trucks—ensures flexibility in an uneven recovery.

Even as cross-border freight dipped 10–15% YoY in Q1 due to tariff uncertainty, TFI’s asset-light structure (capital expenditures at 2.7% of revenue) allows it to scale without overcommitting capital. Management’s plans to spin off its truckload division by 2027 further highlight a focus on core strengths: LTL and cross-border efficiency.

Tech-Driven Growth: Closing the Gap with Peers

TFI’s $200 million 2025 tech investments are pivotal. The Optum software is streamlining route efficiency, while AI-powered pricing tools enable real-time adjustments to match demand. These upgrades aim to narrow the gap between its U.S. LTL OR (93.1%) and its Canadian counterpart (80.2%), which operates at industry-leading margins.

Analysts at RBC note TFI’s 10% free cash flow yield and debt/EBITDA ratio of 2.21x as “GOOD” metrics, outperforming peers like XPO Logistics (XPO) and JB Hunt (JBHT). With $56 million allocated to buybacks in Q1 alone, TFI is returning capital aggressively—a bullish signal in a sector where many peers remain cash-strapped.

Tailwinds Ahead: Supply Chain Normalization and E-Commerce Surge

The post-pandemic supply chain is stabilizing, reducing volatility and favoring logistics players with lean operations. TFI’s e-commerce revenue, growing at a 9% CAGR to $478 million, now serves 80 North American cities, with B2C sales hitting 61% of the segment. This aligns perfectly with the $1.5 trillion U.S.-Canada cross-border e-commerce market, where TFI’s network offers a competitive edge.

Meanwhile, industrial demand—weak in Q1 due to agricultural and manufacturing delays—is expected to rebound as trade policies clarify. TFI’s specialized truckload fleet, expanded by 73% in 2024 via acquisitions like Daseke, is primed to capture this upside.

Undervalued and Underappreciated

TFI trades at a 12.5x EV/EBITDA, a discount to peers like XPO (14.8x) and C.H. Robinson (CHRW, 15.2x). Analysts at Morgan Stanley argue this undervaluation ignores TFI’s $1.05 billion trailing free cash flow and its $5 billion market cap upside through margin convergence. The stock’s 2.64% post-earnings rally hints at investor recognition of its turnaround.

Conclusion: A Bullish Call for 2025 and Beyond

TFI International is a rare blend of operational discipline, geographic dominance, and tech-enabled growth. With cross-border freight poised for recovery, e-commerce tailwinds, and a balance sheet that allows selective M&A, this is a buy at current levels. The path to a sub-90% U.S. LTL OR and $2 billion in free cash flow by 2026 is clear. Investors who act now can secure a logistics leader at a bargain price.

Recommendation: Buy TFII with a 12-month price target of $45.

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Data as of May 13, 2025. Past performance does not guarantee future results.