Surviving and thriving during the pandemic largely comes down to being in the right business.
Anyone associated with the hospitality industry is in trouble. The same applies to airlines, cruise ships, convention centres, film production houses, office and retail real estate investment trusts and a range of other sectors.
The winners include information technology, pharmaceuticals, green energy and companies involved in keeping the supply lines open.
One of these is Montreal-based TFI International Inc. It’s a leader in the transportation and logistics industry, operating across Canada, the United States and Mexico. The company offers package and courier service, truckload and less-than-truckload haulage, logistics and other services.
The company’s shares are performing well. After falling to the $23 range in March, the stock has rallied strongly, ahead by 24.5 per cent year-to-date and trading near its all-time high of $54.77. The stock closed Monday at $54.50.
TFI’s first-quarter results were impressive. The company reported record first-quarter operating income of $118.5-million, an increase of 13 per cent over the same period in 2019.
Adjusted net income was $71.3-million, or 83 cents a share, compared with $67.1-million, or 77 cents, in the year-ago period.
The company benefited from increased demand for its trucking and delivery services as the coronavirus pandemic gripped the economy. The bottom line also benefited from the deferral of certain tax payments because of economic stimulus measures.
TFI has been actively expanding its business through acquisitions. On June 12, the company announced it is acquiring privately held Gusgo Transport Ltd., a container transport and storage company based in Vaughan, Ont. With four company trucks and 48 owner operators, Gusgo delivers both dry and temperature-controlled commodities in an 800-kilometre radius around the Greater Toronto Area, with delivery points in Ontario, Quebec, New York, Pennsylvania, Ohio and Michigan. Gusgo has capacity for storing 6,000 containers at its Vaughan location. The purchase price was not disclosed.
On June 29, TFI announced the acquisition of substantially all the assets of CT Transportation. The company was originally the flatbed subsidiary of Comcar Industries Inc., which along with its other subsidiaries filed Chapter 11 petitions in the U.S. Bankruptcy Court on May 17. TFI swooped in and paid US$15-million for the assets, which looks like a bargain.
Headquartered in Savannah, Ga., CT Transportation operates more than 270 tractors and 560 trailers, with 11 terminals from Maryland to Florida, and generated revenue, excluding fuel surcharges, of approximately US$50-million in 2019. Its approximately 250 drivers transport drywall, lumber, tiles, cement board and other materials to building product manufacturers and home improvement distributors in the U.S. Southeast and Mid-Atlantic regions.
At a time when many companies are cutting payouts, TFI’s board approved an 8-per-cent increase in the quarterly dividend, to 26 cents a share ($1.04 annually), effective with the April payment. The yield at the current price is 1.9 per cent.
During the quarter, the company spent $43.8-million on share repurchases.
The bottom line is TFI is the right business for the times. We should continue to see strong results and more bargain-basement acquisitions in the future.
Gordon Pape is editor and publisher of the Internet Wealth Builder and Income Investor newsletters.
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