Canadian transport company TFI International Inc. late Tuesday posted a $53 million decline in first-quarter operating income to $166.4 million, as a tepid demand environment took its toll. Operating margin dropped to 10.7% from 11.6%.
Revenue of $1.85 billion came in below the $2.191 billion in the same period last year at the Montreal-based carrier. Net income reported at $111.9 million from $147.7 million. Adjusted earnings per share of $1.33 was down from $1.68 in the year-earlier period.
The revenue decline was primarily due to the $525 million sale of CFI’s truckload, temperature-controlled and Mexican non-asset logistics business to Heartland Express last August. The business had $145.5 million in sales during the first quarter of 2022. The drop was also due to reduced volumes from weaker end-market demand.
Volumes at its U.S. less-than-truckload unit, TForce Freight, were down 20%, while shipments in the Canadian operation declined by 9%. Truckload revenue fell 20%, partially on the impact of foreign exchange and a loss of revenue from the sale of the CFI business. Truckload operating income fell by 1%.
In a sign of what is expected to be yearlong macro pressure, TFI said it would reduce full-year earnings guidance to $7 to $7.25 a share from $7.50 to $7.60 per share. Alain Bédard, chairman, president and CEO, said the company hoped that a second-half recovery would get results to $8 or $9 a share but the headwinds for the full year were too great.
“We think the new guidance is really reasonable…We have to be realistic with the market,” Bédard said.
“When we talk to customers more and more, inventory is still high” as more people spend money on services than goods, Bédard said.
Total revenue declined for all four of its main operating segments: LTL, truckload, package and courier, and logistics. Operating income at its LTL business, notably in the U.S. LTL operation, dropped 39% due to lower volumes as well as accounting treatment of various nonrecurring payouts, the company said. Adjusted operating ratio — the ratio of operating revenues to expenses — rose at TForce Freight due in part to weaker volumes.
More bad news on the transportation macroeconomic front creates greater M&A opportunities, Bédard said. The company has allocated about $300 million in 2023 for various M&A activities and share buybacks.
The company has sold about 50,000 shares in U.S. rival ArcBest Corp., a move designed by TFI to stay under the 5% threshold that would require additional reporting disclosures. It has been reported that TFI, which was rumored to be interested in buying ArcBest, spent $89 million on an ArcBest stake.