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  5. TFII: Hi, There has been recent commentary and reports from analysts that trucking sector is witnessing a slowdown and getting hurt with lower rates. [TFI International Inc.]
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Q: Hi, There has been recent commentary and reports from analysts that trucking sector is witnessing a slowdown and getting hurt with lower rates. They also say that these headwinds may persist for at least later half of this year. ( or longer, depending upon, how recession scenario plays out ). Recent results from companies in the sector has only confirmed this.

Specific to TFI, analysts have commented that the discount is already reflected in the current valuation and M&A will likely offset the slowdown impact to certain extent, over time. However, consensus is that any near term recovery is unlikely.

We have a small <1% position in TFII and were contemplating to eliminate it and use the funds to add to existing 1% position in CP or to further add to ATS { better momentum and visibility ).

What are your thoughts ?

Thank You

Thank You
Asked by rajeev on May 26, 2023
5i Research Answer:

A slowdown is probably likely, but TFII really hasn't been hurt much by previous slowdowns in history. It tends to be a buyer of assets if valuations decline.  But, it may be quiet for a period of time, certainly. The stock is up 8% this year and 45% in 52 weeks, and pretty much all that time there has been recessionary concerns. We would be fine still holding a position. CP we think is fine, but it too can see negative impact from a slowdown. It is also 50% more expensive on valuation. While we like it, for an investor worried about a slowdown we are not so sure it would be better than TFII. ATS we like a lot, and would consider it more secular growth and (probably) less cyclical based on its backlog and recent trends. At 21X earnings its valuation is at the mid point of the other two. With small positions we would not really have big concerns here. We think keeping TFII and adding some to ATS might be the best combo here.