TFI International a best idea at Cowen, has 'more wood to chop in 2023'

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By Sam Boughedda 

TFI International Inc. (NYSE:TFII) was labeled one of Cowen's best ideas for 2023 by analysts, who raised the firm's price target on the stock to $125 from $123 on Thursday.

They maintained an Outperform rating on TFI International shares, telling clients in a research note that the company "looks to have more wood to chop in 2023."

"Self-help initiatives within U.S. LTL should lead to improving OR regardless the macro backdrop. Management's 'do more with less' mantra bodes well in an uncertain environment, right-sizing its network to maximize productivity," wrote the analysts.

The analysts believe TFI's 2023 story will consist primarily of TForce Freight opportunities and capital deployment.

"TForce Freight (purchased from UPS) has been one of the most successful acquisitions we have seen in the transportation space in recent years; with only 6 quarters of ownership under its belt, the U.S. LTL network has already generated FCF that amounts to 50% of what TFII paid for the UPS business," they added.

"FII intends to deploy $250MM-$350MM annually for tuck-in acquisitions, (which all must meet the ROIC threshold of 15-25%). This inorganic growth could amount to $2.50 in earnings every 3 years, on top of a larger acquisition every 2-3 years that should equate to similar earnings accretion; this adds $5.00 to TFII earnings every few years. We believe TFII's clear and polished M&A strategy paves the way for material growth in the company's business over the long-term," the analysts continued. "While we do not model future M&A, we see the company's strong M&A track record and potential distressed-carrier sales in 2023 setting the company up well to continue to deliver long-term shareholder value."

TFI shares have moved 2% higher Thursday.