TFI International (TFII) shed over a quarter of its market cap to close out last week, following disappointing earnings results and forward guidance from management.

Of note was the company’s plans to redomicile to the U.S. to better align with its business mix (~70% U.S. revenue), a move which drew heavy criticism from many, including prominent shareholders.

What does this say about the prospects for Canadian transportation & logistics companies?

Canadian trucking is under pressure

It’s been a challenging environment for trucking companies in Canada over the past few years, resulting in above average bankruptcy filings.

2024 should show a continuation of this trend with Pride Group, one of Canada’s largest trucking and leasing companies filing for bankruptcy protection in March ($637M owed to >20 lenders).

Pride highlighted oversupply in the market, as a pandemic-fueled expansion caught the company (and many others) swimming naked when slack returned.

Economic data indicates the demand side of the equation isn’t much better.

The Ivey PMI (based off a survey of 175 purchasing managers) hit its lowest point in >3 years in January, indicating a contraction in economic activity.

Country-wide inventory investment data confirms this trend. Companies are investing less as they try to work through existing balances, which remain elevated in relation to sales volumes.

Less economic activity & inventory investment = less demand for trucking.

Such conditions have prompted TFII to double down on U.S. growth, despite the segment’s weakness in recent years.

How should you play the sector?

It’s been a tough year for the Canadian transportation & logistics basket in general, who have lost more than 10% on average during a period of strong market-wide returns.

Underperformance in trucking is split 50/50 between lower street expectations and multiple compression, while rail and air multiples have compressed more than the decline in share price which could indicate more “value” in these groups.

Future performance in trucking shouldn’t be uniform as Canadian-listed names serve different end markets.

TFII is best-positioned for a strong U.S. economy and the success of reshoring initiatives by the Trump administration.

Mullen (MTL) is best-positioned for a resurgence of the Canadian energy patch given it operates the largest last-mile network in Western Canada and offers industrial services to heavy industries.

Andlauer (AND) could see the most stability of the group, given its exposure to healthcare.