UBS has downgraded TFI International to Neutral, from Buy, and slashed its one year target to US$107, from US$163.
"We are downgrading TFI from Buy to Neutral because we no longer have visibility to a path of significant margin improvement in their U.S. LTL business." TFI's fourth-quarter U.S. LTL operating ratio of 97.3% was 630 bp worse y/y and shipments continue to fall -6%y/y, the brokerage notes.
"Considering the much worse than expected 4Q performance and TFI's commentary of continuing challenges in 1H25, we no longer have confidence in the core thesis of U.S. LTL margin improvement as a key lever for EPS growth."
UBS also noted that since TFI acquired UPS Freight in April 2021, its U.S. LTL shipment volume has fallen more than 30% and volumes continue to decline. "We believe managing the mix of shipments makes sense but we don't yet see clear evidence of stabilization in TFI's LTL shipments, let alone a meaningful move up in volume."
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