TFI shares in Toronto fall 17% after third-quarter earnings miss estimates
Key Facts
Shares of Toronto-listed TFI International fell 17% and closed at C$130.05 on October 30 after the company reported third-quarter results in which adjusted earnings per share missed analyst expectations, according to a Canadian Press report published by the Winnipeg Free Press. EL7 data for the New York-listed shares showed a close of $93.32 that day, compared with $112.54 on October 29. The company posted revenue and net income growth during the quarter, but that did not offset the impact of the adjusted earnings miss and a weaker outlook for the coming quarter. The report also cited the loss of a major freight contract with UPS and weak U.S. less-than-truckload operations among factors that worried investors. An analyst at RBC said the contract loss "explains the market’s reaction today."
Revenue was $2.23 billion in the quarter ended September 30, up 13% from $1.97 billion in the same period a year earlier, according to the results statement filed with the U.S. Securities and Exchange Commission. Net income rose 25% to $105.7 million from $84.7 million. Adjusted diluted earnings per share also increased 39% to $1.67, from $1.20 a year earlier. However, the adjusted figure remained below analysts’ estimate of $1.76 per share, according to the Canadian Press. Thus, improvement in the main year-over-year metrics coincided with a quarterly result that fell short of the estimate the market had been anticipating.
The company’s business units performed quite differently: operating income in truckload rose 91% and in logistics 59% year over year, while it fell 43% in less-than-truckload. The latter segment’s results included a non-cash charge of $14.4 million related to the impairment of a building, according to the company’s statement. TFI said revenue growth benefited from $59.3 million in contributions from acquisitions and $73.7 million associated with improved market conditions. The company’s report said revenue before fuel surcharges was $1,857.9 million, compared with $1,724.9 million in the same quarter a year earlier. The company attributed the increase to acquisitions and improved market conditions in existing operations, while the building impairment charge curbed operating income growth.
Chief Executive Alain Bédard said fuel cost inflation had become a more negative factor for U.S. less-than-truckload shipments, citing the company’s scattered network and lower density. He added that the company handles about 20,000 shipments a day and covers the United States, saying: "We think we will start to get through this period in 2027." He also said pricing initiatives in less-than-truckload had begun to benefit results late in the quarter, with the impact extending into October. But the report said the company had lost a $300 million freight contract with UPS. That development provides further context for the segment’s weakness, as truckload and logistics posted operating income growth.
Free cash flow fell to $116.4 million in the third quarter from $199.4 million a year earlier. The company attributed the decline to growth-related working capital needs and higher capital spending. The company also acknowledged after the quarter ended that the GFP contract would not be renewed when it expires on January 31, 2027; the contract generated revenue of $30.4 million and operating income of $4.2 million in the third quarter. Meanwhile, the board approved a quarterly dividend of $0.47 per share, up 4% from the same period a year earlier. These figures combine pressure on cash flow and contract changes with the company’s continued increase in dividend payments.
TFI expects adjusted diluted earnings per share of $1.30 to $1.40 in the fourth quarter of 2026, assuming no significant positive or negative change in the operating environment. That range compares with analyst expectations of about $1.65 per share, according to the Canadian Press report. The company also set full-year net capital expenditures, excluding real estate, at between $225 million and $250 million. The company had said less-than-truckload pricing began supporting results late in the third quarter and in October, while its chief executive said he expected to get through the difficult period in 2027. Fourth-quarter guidance and the expected expiration of the GFP contract in January 2027 will be specific developments to watch in the coming period.