As you may remember, Canadian firm TFI International purchased UPS Freight from UPS in early 2021 and re-branded them as TForce Freight.
This week, TForce released their 2023 Carrier Earnings results for Q3.
In our last edition, we broke down the Earnings reports in Q3 from Knight-Swift and analyzed the results. In a similar sense, this article will look through TFI’s reports to better understand what’s influencing the achievements or difficulties within TForce Freight's operations.
This series closely examines the contributing factors that lend to eight prominent carriers’ successes or challenges within the logistics industry. We break down announcements from each carrier and analyze their quarterly results for 3Q23.
To learn more about carrier performance reporting, click here to start a conversation with our team today.
Below is what TForce’s management reported for Q3, along with some of our commentary:
📦 Carrier 3: TForce Freight
Revenue for TForce is down a whopping -18% year over year but is up 7.3% due to the Yellow closure.
In a similar sense, shipment counts are down -7.5% year over year but up 5.1% sequentially (also because of Yellow).
Shown above: TForce Quarterly Earnings 2023 (Q3)
TForce was averaging 23,000 shipments per day before the Yellow Corp closure, and 26,000 immediately after.
Now, they’re down to 24,500 - 25,000 per day. This whipsawed their labor needs, and they were slow to adjust.
As mentioned in our FedEx Freight Q3 Earnings Analysis, TForce was one of the carriers that absorbed too much Yellow business and drove that business to other carriers because of service issues.
They stated that Rev/cwt was down partly due to larger shipment size; but TForce was not able to fully capitalize on Yellow’s closure since they still have to work on improving customer experience, service, and pricing prowess.
For example: the average age of trucks has fallen from 8 years to 4.6 years since purchase from UPS.
Tonnage was stable year over year, down just -0.8% and up 10% sequentially...again due to Yellow.
Weight/shipment has been increasing, up 7.4% in 3Q23 compared to last year.
We think this is a result of reduced low-weight business through their GFP (Ground Freight Pricing) program. A significant -11.7% decrease in revenue/cwt can also be attributed to the decline in GFP-related business.
Management believes that 2024 will be “better” than 2023… they’re not sure how much “better” though. It’s still soft right now.
GFP (Ground Freight Pricing) biz is down significantly at -40% but is moving back up… which has been a drag. Right now, their focus is less on getting more revenue from customers and more on reducing costs.
🙏 Promising Projections for 2024
They expect their 2024 OR to be in the 87-88 range, solidly below their currently reported level of 90.
Contrary to how TFI computes OR by removing Fuel Surcharge, we show their 3Q23 OR to actually be 92.3, which is a slight improvement from 92.8 in 3Q22, using the OR calculation most all other carriers use.
This would mean their OR target for 2024, based on how most all other LTL carriers compute OR, is 85-87.
As of now, TFI said they are not benefitting as fully from the Yellow closure as they could.
They’re still rolling out new reporting tools to terminal management to manage their business, and benefits are expected to show in 2024.
Getting ready for 2024 like:
To them, there’s no reason why TForce (in the US) cannot match the OR levels of their Canadian LTL operation of sub-80 ORs once the terminal-level reporting tools are fully deployed.
This assumes the Canadian LTL market is as equally competitive as the US LTL market.
👨👩👧👦 Adjustments in TFI’s Internal Org
Since being purchased from UPS, TForce has shifted from being a Sales-oriented company to an Operations-oriented company.
Rather than Sales dictating the customers that Operations will serve, Operations will now tell Sales what kind of freight they need to get.
They advised that the likelihood of doing something of size in terms of Acquisitions is between 65%-75%.
TFI will have $300M to $400M in cash at the end of 2023 and has borrowings left on a $500M debt placement; so they have lots of dry powder to use towards a "big" deal.
They noted it was not the right environment for a big LTL GRI, and took a 4.9% GRI effective October 2nd - while Saia just announced a 7.5% GRI effective December 4th.
To them, TForce does not have the same reputation as a Saia or ODFL and cannot push out a large GRI because of it.
TForce has to be a follower right now as service improves, and can then maybe be a leader in Pricing.
They cannot be as aggressive right now as what Saia just announced.
We believe that TForce is still being impacted significantly by customer and freight mix changes prior to 2023. Compared to 2022, revenue-based metrics are down substantially.
The drops in revenue and rev/cwt with little change in tonnage or shipment metrics suggest high-class and/or accessorial-intensive business has been dropped…possibly related to GFP.
Sequentially, TForce is tracking closer to its peers on metrics.
🗣️ Word from TForce Management
Management was straightforward in describing TForce Freight's current status and outlining their expectations for the future.
They clearly stated that TForce is not yet in a position to command a premium price for their service, and they have a lot of work to do on that front. They also have a lot of work to ensure terminal management sees and understands freight costs.
Management has also been vocal about M&A, noting that they tend to do something big every 3 years.
We are coming up on the 3-year anniversary of the purchase of UPS Freight, which was a unionized carrier.
TForce management has made some bold statements about potential M&A activity with ABF Freight / ArcBest.
With Yellow closing, ABF Freight is the only remaining major unionized national LTL carrier - Don't be surprised if we begin hearing more about this possible hook-up, in some form or fashion, over the next few months.
(TForce has a cost advantage over ABF due to legacy pension costs, and that could be an angle.)
🔜 Coming Up Next: Old Dominion
Keep an eye out for the next part of the series tomorrow with Q3 Earnings results for Old Dominion Freight. Once again, Old Dominion cranked out an impressive operating ratio for 3Q23.
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This article was collaboratively written by “LTL Observers” - a collective of industry veterans spanning the carrier, shipper, 3PL, and tech provider spaces who are willing to share their opinions.
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