(Montreal) The market and economic turbulence could lead to the emergence of acquisition targets at an attractive price for the trucking specialist TFI International, believes its president and chief executive officer, Alain Bédard.
Updated yesterday at 4:26 p.m.
For the big boss of the Montreal company, the specter of a recession seemed more a source of opportunity than concern as he answered questions from financial analysts on a conference call to discuss the results of the second trimester.
“If a recession hits, I like that about M&As, because it adjusts valuations [des actions] in a context of recession, he underlines. Since April, most trucking companies have lost 10% to 20% [en Bourse] because there is a perception that we are going into a recession. »
Mr. Bédard said that it would be “impossible” to complete a major acquisition this year, but that the door was certainly open for 2023. “I believe that 2023 is the right time for us. The targets we have are always interesting. Let’s see what 2022 will be like and we’ll be ready for a sizeable acquisition. »
The last major acquisition for TFI dates back to 2021. It is a former division of United Parcel Service (UPS), renamed TForce Freight, acquired for 800 million US. Mr. Bédard pointed out that productivity gains have been made since the acquisition, but that “much remains to be done”, in particular to make trips more efficient and renew the vehicle fleet.
In the meantime, TFI wants to buy back more of its own shares. Generally, a company repurchases its shares when it believes that the price of the security is undervalued and that it considers this to be the best use of its capital compared to investments, acquisitions or a dividend increase. By decreasing the number of shares outstanding, the profit is distributed among a reduced number of shares.
“We believe that our action is always affordable, said the leader. Maybe not over a six-month horizon, if we go through a recession, but over the long term if you look at the next five years. »
TFI had obtained authorization to buy back 7 million shares until 1er november. It has already bought back 4.4 million as of June 30. The company will ask the Toronto Stock Exchange to increase the maximum allowable from 7 million to 8.8 million.
No recession yet
Despite economic concerns, business continues to go well for the company.
A lot of people talk about a contraction in the freight industry or a recession, but when I look, even for the month of July, we’re still going full throttle.
Alain Bédard, President and CEO of TFI International
He said that the Canadian economy is doing well, thanks in particular to the strength of oil prices which are supporting the economy in the western provinces. “We know this storm will come one day. If a recession looms, we’re ready. »
The release of the results comes at a time when the risks of a recession caused by inflation and rising interest rates are raising fears in several industries. On Thursday, the US government disclosed that US gross domestic product (GDP) declined in the second quarter, the second straight decline.
This data is fueling the debate on the state of the US economy. A sequence of two consecutive quarters of decline means that there is a recession, but the employment indicators do not suggest a period of economic contraction.
Results above expectations
The executive made the comments on the heels of results that beat analysts’ expectations as demand remains strong.
The company’s net profit of $276.8 million was down from $411.8 million last year, but included a $283.6 million gain related to an acquisition. Revenues, for their part, increased by 32% to reach 2.42 billion US.
Adjusted diluted net earnings per share reached US$2.61, which represents an increase of 76% compared to US$1.44 last year.
Analysts had expected earnings per share of US$1.69, according to Refinitiv.
Analyst Benoit Poirier of Desjardins Capital Markets called the results “impressive.” “We recommend that investors take a fresh look at the stock and buy it, especially given what we believe is unwarranted underperformance. »
The stock was up $6.58, or 5.42%, at $127.90 at the end of trading on the Toronto Stock Exchange.