Tale of 2 segments at TFI: LTL steady, Truckload soaring

The difference between the two at TFI (NYSE: TFII) was most stark in their respective EBITDA margins. It was 18% for LTL, and 24.1% for Truckload. (Logistics had a 16.3% EBITDA margin). In the first quarter, the respective numbers were 12.1% and 19.5%. While the percentage gain was more for LTL in the quarter, that measure of profitability continues to lag Truckload.

In one notable part of the conference call, CEO Alain Bedard and CFO David Saperstein talked about the differences in the markets for the two largest segments. 

Supply, not demand

“What we see on the pricing side of Truckload is very impressive,” Bedard said. “It’s mostly because of the supply constraint, not because demand is going through the roof.”

Saperstein said in Truckload’s metric of revenue per truck per week, that measurement accelerated during the quarter. Year-over-year, Saperstein said, that number was up 11.1% in April, 13.3% in May and 14.4% in June. 

Bedard said the Truckload operating ratio (OR) in the first quarter was above 90%, 92.7% to be precise. “And now we’re down to 86.1%. I think that this is quite an accomplishment.”

By contrast, LTL shipments were up 7.5% in the quarter, but revenue per shipment was down 2%.

Bedard, asked by an analyst whether this current rising truckload market was different from past bullish periods, said that was “absolutely right.”

“In a normal trucking environment, guys used to make a lot of money when the demand was high.” he said. “It could last a month, it could last a year, it could last 18 months.”

After that, demand would decline and the bull market would be over. “What I like about this market, which I’ve never seen before in 30 years, is now it’s the supply,” Bedard said. “I think this is more of a permanent thing than we’ve ever seen before.”

More volume in LTL means more costs

In the company’s LTL operations, the rise in second quarter LTL volume–a 7.53% increase in shipments year-on-year–was not an unalloyed good development at TFI, Bedard said.

“We incurred way too many costs in our second quarter operation because of this huge surge in volume,” Bedard said. “But our service suffered also.”

Saperstein added that TFI is implementing changes in its LTL pricing, aided by technology. 

“We now have tools where we’re taking spreadsheets with about 500,000 lines and tons of columns, tons of data,” he said. With technology tools, “we’re able to really isolate the problematic lanes, the problematic freight. And then we’re using that to help our pricing team go in and be real surgical and move faster. We’ve able to treat large amounts of data in a way that we haven’t been able to in the past.”

Daseke’s impact

In Truckload, besides the loss of supply as a benefit, Bedard cited changes in the company’s specialized operations, much of which can be traced back to its acquisition of publicly-traded flatbed operator Daseke in 2024.

TFI’s financial performance was aided by a drop in depreciation of property and equipment, down 5.6% year-on-year. Much of that appears to have come out of the Truckload operations, based on comments made during the call.

Bedard has said previously that Daseke may have been too aggressive in acquiring new equipment, and that contributed to poor performance when it kicked back on to the earning statement in the form of depreciation. But that is now declining. 

“We bought Daseke in ‘24 and we were stuck with its capex,” Bedard said. “These guys liked to buy trucks and trailers. So we had too much capex in ‘24.” He said with various plans in place, that continued into 2025.

But TFI is now “adjusting our asset base to the business we want,” Bedard said. The number of trucks at TFI at the end of the second quarter totaled 11,987 along with 39,710 trailers. A year earlier, the corresponding numbers were 13,511 and 42,796. 

Flatbed operations at TFI have benefited from activities related to wind turbines and data centers,” Bedard said. (He added that a TFI flatbed subsidiary, Lone Star Transportation, is  “good with wind and good with data centers.”)

On the call, Bedard said those improvements in its Truckload segment are expected to continue. For all of 2026, he said TFI expects an improvement of 500 to 600 basis points in the OR at its Truckload segment. He also said the Logistics segment would improve by 250 to 350 basis points, but that LTL would be “comparable.” OR for LTL in the quarter was 11.8%.

“The world of Truckload has changed tremendously over the last six to nine months, with all the things the administration has done in the U.S. to help us reduce supply,” Bedard said.

By contrast, Bedard said, the LTL market in the U.S. and Canada are both “still very soft.”

“There’s no big revolution in demand there, so this is why we’re conservative,” Bedard added. “We want to say that in LTL, we don’t see a lot of major improvement versus what we can see in the Truckload or Logistics sectors.”

“What we’re seeing on LTL is that the reason margins are expected to be flat is because we have too much volume and not enough price,” Saperstein said. “And that’s what we’re working on fixing.”

Bedard did provide some forecasts of future economic performance. He has long touted TFI’s free cash flow numbers, which he said generated about $200 million in the quarter compared to about $186 million a year ago. As a result, Bedard said TFI was able to reduce its debt to EBITDA ratio to 2.4X, compared to 2.5X at the start of the year.

TFI does not have publicly-traded debt. About a year ago, an LTL competitor, XPO (NYSE: XPO), had its rating lowered by S&P Global Ratings to BB, which is less than the investment-grade. At the time, S&P said the debt ratio at XPO was about 2.5X, roughly equivalent to what Bedard spoke about on the conference call when discussing TFI’s debt load. 

Third quarter earnings per share at TFI are expected to be $1.70 to $1.80, Bedard said, compared to $1.65 in the second quarter.

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