We have many great companies in Canada, some of which few people know about.
One that falls into the under-the-radar category is TFI International Inc. (TFII-T). Based in St. Laurent, a suburb of Montreal, it’s a transportation and logistics giant, whose network spans more than 80 North American cities. It has more than 90 operating companies under its banner and employs some 24,000 people.
TFI has four business segments: truckload, less than truckload (LTL), logistics, and package and courier. It has the largest delivery fleet in Canada, with more than 14,000 company-owned trucks and about 50,000 trailers.
This is a company that grew by acquisition. Since 2008, it has purchased an astounding 121 related businesses across the United States and Canada. Each potential deal is carefully vetted for the strength of its management team, cultural fit and earnings potential.
TFI was started in 1957 as Cabano Transport by Reno and Réal Emond. Initially it grew by acquiring small trucking firms in Quebec and the Maritimes.
In 1992, it made a big move with the purchase of Kingsway Transports Ltd. and its U.S. operations, changing its name to Cabano-Kingsway. It added to its U.S. business eight years later by acquiring TST Solutions. By that point it had changed its name again, to TransForce Inc.
In subsequent years, the company acquired several more prominent trucking/courier businesses, including Canpar, Canadian Freightways, Contrans Group and UPS Freight.
In 2016, the company changed its name again, to TFI International.
TFI was trading on the TSX when it converted to income-trust status in 2002 to take advantage of the tax breaks that status offered. It reverted to a corporation after the federal government changed the tax laws to make trusts unattractive. The company also trades on the New York Stock Exchange, announcing its first issue of stock in the U.S. in 2020.
We first recommended the stock in my Internet Wealth Builder newsletter in June, 2012, at $17.49. It has been an outstanding performer, closing Friday at $177.42, for a gain of 914 per cent. It’s also a strong contributor to our Internet Wealth Builder Growth Portfolio.
The company recently released second-quarter results. Revenue and profits were down compared with last year, but the board of directors wasn’t concerned, approving a 30-per-cent increase in the quarterly dividend to 35 US cents (US$1.40 a year).
Operating income was US$192.4-million, down from US$391-million in the same quarter last year. Management said the decline reflected reduced freight volumes and several non-recurring costs.
Adjusted net income was US$138.9-million (US$1.59 a diluted share), down from US$241.1-million (US$2.61) in 2022.
“Despite a difficult freight market and reduced volumes industrywide, our results reflect the quality of our operations and our team’s skill in responding to rapidly changing market conditions,” said chief executive officer Alain Bédard. “TFI’s strong financial foundation and focus on profitability and cash flow is allowing us to remain strategic in our allocation of capital, remaining active in M&A including seven completed acquisitions year to date, while also returning capital to shareholders through both our dividend, with our board approving a 30-per-cent increase over the past year, and our opportunistic share repurchases.”
The company is continuing down the same growth track that got it to this point. After the most recent quarter, TFI announced the acquisition of B.C.-based Vedder Transportation Group, which specializes in food delivery services. Vedder generates annual revenue in excess of $80-million. No purchase price was announced.
We still like the stock. The shares are up 30 per cent since the start of the year. With the latest dividend increase, the stock yields 1.1 per cent, which is respectable for a growth-oriented company. TFI closed Friday in Toronto at $177.42.
Gordon Pape is editor and publisher of the Internet Wealth Builder and Income Investor newsletters.
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