TFI International - Q4 2025
February 18, 2026
Transcript
Operator (participant)
Good day, ladies and gentlemen. Thank you for standing by. Welcome to TFI International's fourth quarter 2025 earnings call. At this time, all participant lines are in listen-only mode. Following the presentation, we will conduct a question-and-answer session. Callers will be limited to one question and one follow-up. Again, that's one question and one follow-up so that we can get to as many callers as possible. Further instructions for entering the queue will be provided at that time. Please be advised that this conference call may contain statements that are forward-looking in nature and are subject to a number of risks and uncertainties that could cause actual results to differ materially. I would also like to remind everyone that this conference call is being recorded on February 18, 2026.
Joining us on the call today are Alain Bédard, Chairman, President, and Chief Executive Officer, and David Saperstein, Chief Financial Officer. I would now like to turn the call over to Mr. Alain Bédard. Thank you. Please go ahead, sir.
Alain Bédard (Chairman, President and CEO)
Well, thank you, operator, for the kind introduction, and thanks everyone for joining us on today's call. Last evening, we reported our quarterly results showing robust free cash flow driven by international initiatives and the hard work of our team. With overall freight dynamics showing modest signs of stabilization, the men and women of TFI are busy preparing for a potential industry rebound and controlling the controllables. And another focus of ours, which you've heard me emphasis many times, is producing strong free cash flow regardless of the cycle. I'm pleased to say that we generated more than $10 per share of free cash flow in 2025, or $832 million for the year, and notably, our fourth quarter free cash flow was 25% higher than the year ago figure.
At TFI, we view this free cash flow as very important, given our strong track record of strategic capital allocation. We intelligently invest for the long term, even during down markets, and whenever possible, return our excess capital to shareholders. As you may recall, during the fourth quarter, our board again raised our dividend, and over the course of 2025, we continue our track record of opportunistic repurchase, buying back over $225 million of common shares. Now, let's turn to the other aspect of our fourth quarter results. Total revenue before fuel surcharge of $1.7 billion compares to $1.8 billion a year earlier, and we generated $127 million of operating income, reflecting a margin of 7.6%.
Our net cash from operating activities improved meaningfully to $282 million, which was up 8% over the prior year quarter. Our free cash flow from the quarter was $259 million, reflecting a 25% year-over-year increase, as I mentioned. Taking a more granular look at our business segment, let's begin with LTL, which represent 39% of our segmented revenue before fuel surcharge. At $661 million, this was down 10% compared to a year earlier. However, we were able to improve our adjusted OR slightly more than expected to 89.9 relative to 90.3 in the year ago period. Our total LTL operating income was $62 million, compared to $70 million a year earlier. We also generated for LTL a return on invested capital of 12.2%.
Next up is truckload, which was 40% of a segmented revenue before fuel surcharge at $674 million for the fourth quarter, as compared to $693 million the prior year. While tariff and the general economic uncertainty still affect freight volumes and excess capacity has been an industry-wide concern, we continue to seek growth opportunity that our network and our infrastructure are particularly well suited for. This includes both data center and the broader economic grid, electric grid, to market, in which we've demonstrated recent successes. Our truckload operating income of $48 million compares to $60 million a year earlier, and our OR of 93.2% compares to 91.5%. So wrapping up on truckload, our return on invested capital came in at 5.8%.
Lastly, in our segmented discussion, logistics was 21% of segmented revenue at $358 million, relative to $410 million in the fourth quarter of 2025. Operating income was $31 million versus $43 million last year, and this represents a margin of 8.7% versus the 10.5%. I'll note that despite slightly lower logistics revenue sequentially, we were able to expand our operating margin by 30 basis points over the third quarter. Finally, our logistics return on invested capital was 11.8%. Shifting gears, our balance sheet is a pillar of our strength, supported by the $830 million of free cash flow we produced during 2025, including more than $250 million during the fourth quarter alone, both figures up year-over-year.
We ended the year with a 2.5 times funded debt to EBITDA ratio, and given this financial foundation, we continue to pay an attractive dividend and repurchase more than $225 million worth of common shares during 2025 as I mentioned previously. We also continue to seek accretive bolt-on acquisition opportunities. I'll conclude with our outlook as we enter the new year. For the first quarter, we look for adjusted diluted EPS to be in the range of $0.50-$0.60, and for the full year 2026, we initially expect net CapEx, excluding real estate, to be in the range of $225 million-$250 million. As I mentioned in the past, our outlook assumes no significant change, either positive or negative, in the operating environment.
So before we open up the Q&A, you may also have seen our press release yesterday about the latest change to our board of directors. So I want to again express my gratitude to my friend, André Bérard, for his more than two decades of service as a director of TFI International, most recently as our lead director. His impact on our board since 2003 has been enormously beneficial to the firm, and we all wish him all the very best in his upcoming retirement. I would also like to congratulate Diane Giard on her nomination as our new lead director. Now, operator, if you could please open the lines for both David and myself, we'll be happy to take questions.
Operator (participant)
Thank you. Ladies and gentlemen, we will now begin the question-and-answer session. Should you have a question, please press star followed by the 1 on your telephone keypad. Should you wish to cancel your request, please press star followed by the 2. I would like to advise everyone to have a limit of one question and one follow-up. If you're using a speakerphone, please lift the handset before pressing any keys. One moment please, for your first question. Your first question comes from the line of Ravi Shanker from Morgan Stanley. Please go ahead.
Speaker 12
Hi, this is Nancy on for Ravi. Thanks for taking my question. I was wondering if you could help, give some guidelines around the fiscal year guide and potential scenarios to get there, and how you're thinking about, 2026 as a whole, would be great.
Alain Bédard (Chairman, President and CEO)
Yeah, well, that's a very good question. So this is why we came out with our Q1, okay, with $0.50-$0.60. I mean, that this is down year over year versus 2025, because we're still in a transition environment. The freight recession that we've seen since 2023, 2024 and 2025 is still persistent, as we look at Q1. We're starting to see some very early sign in our truckload sector that maybe things will start to get better, okay, during 2026. This is very early. You know, the change in the U.S. with the CDL and not renewing some permits as drivers, et cetera, et cetera. okay that may help the truckload industry in general.
On the Canadian side, the fact that now every owner-operator who are not an employee, but let's say a Driver Inc., now has to be issued a T-4A, which is a kind of, like a W-2 in the U.S. as an employee. So now he's got to report his income and pay taxes, so we're starting to see some people disappearing, okay, in 2026. But this is the very early days in the truckload sector. On the LTL side, I mean, we're still in a very difficult environment, and we anticipate that it's still gonna be the case for probably 2026 as a whole.
On the logistics side, though, I mean, we feel really good that, okay, yes, our Q4 2025 was not as good as the previous year, but in terms of, one of our division that moves trucks for, the most important manufacturer in the U.S., PACCAR and Freightliner, we think that, this is gonna start improving by probably Q3 and Q4, going back to normal. So on the logistics side, we have a more clear path of, the major improvement that we could see during the course of 2026. Truckload, meh, early signs that things will probably get better, although, nothing is sure. With it's very early in 2026. We're just in the in February. On the LTL side, U.S., still very soft market.
On the Canadian side, very soft market too, but we do way better in Canada than we do in the U.S. because, if you look at our revenue per shipment, number of shipments are down, okay, in Canada, the same as the U.S. but we're able to maintain an operating ratio very close to what we were doing, let's say, a year ago. So we have a better control on our costs. Still in Canada, if you look at our claim ratio, for example, which is like, unbelievable, we're close to zero in Q4 on the Canadian LTL side, and we're still at 0.9% of revenue on the U.S. side, which is an area that we definitely have to improve during the course of 2026.
I mean, we had some better quarters on that, in that regard, on the claim side, and we need to focus more on that, and this is a big area of focus, in terms of improving our service on the U.S. LTL side with our customers. So you don't want to break the customer's rate or lose it, right?
Speaker 12
Got it. Thank you. That's very helpful. I guess touching on that a bit more, do you guys feel ready for the upcycle, if it comes within U.S. LTL with the idiosyncratic changes you have made, or is there a lot more work you need to do within 2026?
Alain Bédard (Chairman, President and CEO)
No, we're ready, Nancy. I mean, we are really ready. I mean, in terms of, the management tools that we have today versus, let's say, just 2, 3 years ago, I mean, we are very well equipped. We have financial information by terminal now. You know, we've implemented Optym on our line haul. We have Optym also implemented, which is a software, on our delivery side. Okay, now we're going to phase two, which is gonna be also implemented for the pickup side. So, I mean, we're ready. We have the tools. We are improving our team on the commercial side.
I mean, we have way more stability in our sales force than ever, okay? So, our friend, Mr. Trakas has done a fantastic job of creating some stable environment in the sales team, understanding the focus of what these guys need to do. And I think that probably for the first time, it's still early in the game, but in q1 we're probably for the first time in a long time, show that our shipment count is about equal to the, to the one of the previous year. Very early still, okay, but if you look at Q4, we were down 10%. We're down 6-7% in Canada, but down close to 10% in the US. So it would be quite an accomplishment as a first step, okay, to be able to at least maintain the volume that we had in Q1 2025.
Speaker 12
Very helpful. Thank you.
Alain Bédard (Chairman, President and CEO)
You're welcome.
Operator (participant)
Thank you. And your next question comes from the line of Jordan Alliger from Goldman Sachs. Please go ahead.
Jordan Alliger (Equity Research Analyst)
Yeah, hi, good morning.
Alain Bédard (Chairman, President and CEO)
Good morning, Jordan.
Jordan Alliger (Equity Research Analyst)
Yeah, I hear your thoughts around the demand environment. I'm just sort of curious, as we roll into the or through the first quarter, is there a way you could give some additional color as to perhaps the segment margin-related drivers behind the $0.50-$0.60 EPS guide? Again, realizing that you're not assuming much change in the operating environment, but maybe give some sense for shape of those margins as we move forward seasonally. Thanks.
Alain Bédard (Chairman, President and CEO)
Well, that's a very good question, Jordan. This is why I'll pass it on to David, which is our CFO.
David Saperstein (CFO)
Sure. Hi, Jordan.
Jordan Alliger (Equity Research Analyst)
Hi.
David Saperstein (CFO)
So we're looking at probably around 250 basis points of sequential margin deterioration in the U.S. LTL. And I just wanna qualify that by saying that Q1 is unique in the year, and that it's very back-end weighted to March. And so it's very difficult to get a sense for the trends based on January and the first half of February. And this year, particularly so, because we lost at least 100 basis points related to weather, which caused us to have a lot of overtime expense, et cetera. So we anticipate around 250 basis points sequential deterioration, but it's heavily weighted towards March, which of course, hasn't occurred yet, and we don't have perfect visibility into.
In terms of Canadian LTL, about the same in terms of the sequential move. P&C is 1,000 basis points down, and 15% revenue down, sequentially, which is normal seasonality for us, Q4 being a peak season in the P&C. Specialty truckload, like Mr. Bédard was saying, we are seeing some early signs of positive things in the truckload, and so we expect to be flat sequentially from Q4 to Q1, in the specialty truckload. The Canadian truckload, a little bit of a erosion, maybe 100 basis points, margin deterioration, sequentially, and then logistics are around 150 basis points.
Jordan Alliger (Equity Research Analyst)
All right, great. Thank you. And just out of curiosity, I know the weather's had an impact. Are you able to share a little bit more color around... I know March is so important how's January, February volumes, and is it possible, I know you alluded to it a little bit, it can you still make that up in March on the tonnage side for LTL?
David Saperstein (CFO)
Yeah. Well, listen, the January was very, very difficult, both from a volume perspective and from a cost perspective because of the costs associated with the weather and the disruptions, and the inefficiencies that that caused. February, we saw volumes tick up, and that's why Mr. Bédard is making a reference to potentially being flat year over year, in volumes. We'll see how the pricing follows, as it relates to that. But we can see that the volumes are... did tick up in February.
Jordan Alliger (Equity Research Analyst)
Thank you.
Alain Bédard (Chairman, President and CEO)
You're welcome, Jordan.
Operator (participant)
Thank you. Your next question comes from the line of Walter Spracklin from RBC Capital Markets. Please go ahead.
Walter Spracklin (Equity Research Analyst)
Yeah, thanks very much. Good morning, everyone.
Alain Bédard (Chairman, President and CEO)
Good morning.
Walter Spracklin (Equity Research Analyst)
So, I know you mentioned some of the improvement that you're seeing, and David just mentioned it as well, in the fundamentals of trucking attributed to some of the CDL and English-
Alain Bédard (Chairman, President and CEO)
Yep.
Walter Spracklin (Equity Research Analyst)
English language proficiency testing. Are you seeing that now built into your pricing, your contract pricing? We see pricing move on the spot side, but are you seeing at all any improvement in pricing on a contracted basis, particularly in U.S. LTL, or if it is differentiated by segment or region, if you could touch on that?
Alain Bédard (Chairman, President and CEO)
Yeah, that's a very good question also, Walter, because spot moves first and, and you know, when the shippers start to see a movement upward on the spot, they try to get into a long-term agreement with you, with those low rates, right? So to answer your questions, yes, spot are up on the van side. I mean, we're starting to. It's also inflation for us on the linehaul for our LTL, because some of our LTL is moved by third parties, okay? And we saw price moving up in Q1 so far. But on the contract rate, it takes more time. It takes more time, Walter, so that shippers are going after you, commit to long-term pricing at these low rates.
And as a trucker, what you normally say is, "Let's wait. Let's wait and see." So for now, no, on the long-term rates, it's still not as good as the spot rate, but we believe that the fact that the... It's always a supply and demand balance, so the supply is starting to reduce, okay? The demand is still not great, okay? This is the issue we have for the last few years, is that the supply has always been growing because of the 2021, 2022 COVID era, where we added so much capacity, okay, that now we're stuck with overcapacity.
And now the offer is starting to reduce a little bit, and the demand is still not very strong, but we anticipate that if the demand starts to go upward and the offer is also being reduced. So this is why as 3PL, they're starting to see some pressure because the truckers are asking for more money, and they can't get that kind of money from the shipper yet. So a little bit of pressure on rates for, let's say, our 3PL organization. But long term, medium term, for sure, the contract rates will start to go up if this trend of reducing the offer and a little bit of increase in the demand continues in 2026.
Walter Spracklin (Equity Research Analyst)
Okay, that's fantastic. I'd like to go back to your guide now and know reflect in some of the inbounds I'm getting, in the sense that you delivered much better than your guide had. Your guide for Q4 had been set at $80-$90. You came in with $109. Can you talk a bit about what you know, we can see what we had been forecasting relative to what you came in with, but really, internally, where was the area of outperformance, and is that area of outperformance now built into your guide for Q1 as well?
Alain Bédard (Chairman, President and CEO)
Well, you know what, Walter, like David was saying, the problem that we face is that we are giving guidance on Q1 based on a normal month of January, right? And a very early signs of improvement in February. So this is why we're cautious. I mean, this is what we believe it could be delivered by our operation, okay? Hopefully, we do better than that, like we did in Q4. But then again, the other problem we have, Walter, until we have a deal between U.S., Canada, and Mexico, which is supposed to come, let's say, in the summer of 2026, even if the market there's a reduction in the offer, the demand is still not very strong. So this is why we have to be very careful.
Until such time that we have a new agreement between the three countries, where our customers knows what's gonna happen in the future, then we're gonna feel way better, okay, in terms of being able to forecast what can the company deliver in terms of our profitability.
Walter Spracklin (Equity Research Analyst)
Okay. I appreciate the time, as always.
Alain Bédard (Chairman, President and CEO)
It's a pleasure, Walter.
Operator (participant)
Thank you. And your next question comes from the line of Brian Ossenbeck from JPMorgan. Please go ahead.
Brian Ossenbeck (Equity Research Analyst)
Hey, good morning, Alain and David. Thanks for the question.
Alain Bédard (Chairman, President and CEO)
Morning, Brian.
Brian Ossenbeck (Equity Research Analyst)
Morning. I just wanted to hear a little bit more about the specialty truckload business. Obviously, heavy industrial there, so assuming not seeing too much of an uptick yet, but we've seen a little bit of life in the PMI, but also wanted to hear a little bit more about the data centers, the electrical grid, the things that probably have maybe a little bit more longer tail to them, but I'm not quite sure how big they are and how fast they're growing at this point. So maybe some more details on the industrial side with those two in focus.
Alain Bédard (Chairman, President and CEO)
Yeah. Yeah. You know what? This is something new for us, right? This is coming right now, okay? It's our Lone Star operation out of Texas that is really the one being involved in wind. Although wind is, is gonna be quite active in 2026 and moving some equipment for the data center. One of our latest acquisitions is also bidding on some job up north in Michigan and those northern states in the U.S. That could be a positive for us if these guys were able to win these adventures. I mean, we are an industrial carrier, us, in our truckload. We're not a retail guy, okay? We are industrial, and for sure, let's say own building, we start moving in the right direction in that regard. Okay, that's gonna help.
But us, in the meantime, this is why we created this job of Chief Commercial Officer for all of our U.S. truckload with Mr. Hupp, that is now in charge of working, okay, all of our network participants, in that, in that sector. so we, we are deeply focused on what is moving now, and what is moving now is where the major investment are in the energy sector and wind, solar, and the data center. So that's our area of focus right now. But hopefully the other sector, okay, of the industrial, which is construction material and all that, starts to move in 2026. Now, like I said, with this latest acquisition that we've done, late in 2025... these guys are very good.
Hopefully, they're successful in those bids, and we'll see, because this could be a very interesting win for us. So we'll see if these guys are able to get the ball moving on that. So all in all, we start, okay, like we said, we're just seeing a little bit of the early sign of some industrial activity, which is our world. I mean, we're not a van carrier that moves retail freight, right? For, let's say, a Walmart or Amazon. I mean, us is we move steel, we move aluminum, we move building material, et cetera, et cetera. So that's our core, okay? Same in Canada, too, right? So hopefully, this starts to move. And like you said, there's some movement on PMI. hopefully those major investments starts to increase.
Under the new administration, we're hopeful that this will happen.
Brian Ossenbeck (Equity Research Analyst)
All right, maybe just to follow up on the TForce side of things. The weight per shipment looks like it's stabilizing a bit here, talking about getting back to maybe flat tonnage growth here, in the quarter maybe improving from there. Is that service and network dependent, or is that more of a call on the economy? I would assume it's more of the former, but just wanted to see how far along you are with that, with those improvements to the point where you can maybe grow a little bit faster, than what the market's giving you.
Alain Bédard (Chairman, President and CEO)
Yeah. See, our focus is if you look at what we do in Canada, in terms of our weight per shipment, is way higher than what we do in the US. Why is that? Because you have to understand that, TForce Freight is used to be UPS Freight, and their focus was retail, like, like UPS per se. And as we're saying, forget about retail. As much as you can, move away from retail and, and let's move freight that is based on the industrial base. So this is why our weight per shipment, since we bought the company, went from about 1,075 to 12-something now, 1,225, 1,250, right? And, and the push is to continue to move into that sector of industrial LTL versus retail LTL.
We understand that a lot of the retail stuff, more and more, okay, will be controlled by the gig economy, by the Amazon and all that. So this is why we're saying to our guys in the U.S., "Let's focus on the industrial sector of the economy versus the retail sector of the economy." Now, the problem, like I just said earlier, is that the industrial economy is slow, is very soft, right? But this is why it may be a little bit more difficult to do this transition, but that's a focus of ours, is to move away as much, as fast as we can, okay, from the retail economy, because we're seeing what's happening, okay, with the gig economy, with the Amazon and all the others one.
So, guys, let's change, okay, the focus. We've been quite successful so far, okay, doing that, but we need to improve more. We have to be closer to 1,400-1,500 pound shipments, because don't forget, you're paid—normally, you're paid by the weight. So, and the cost is not based on the weight, the cost is based on the movement, right? So you move a pallet that's 1,000 pound or move a pallet that's 1,500 pounds, the cost is about the same. Maybe different on the linehaul, but linehaul the issue is always cube before weight.
David Saperstein (CFO)
Yeah, and the service point continues to be very important for us, Brian and that's how we're looking to grow and move. I mean, it's true that we took a step back on the claims ratio, but the other service metrics are moving in the right direction. I can tell you that in Q4, the missed pickups were 1.5%, down from 3.3% a year ago. Reschedules at 8%, down from 12% a year ago. On time is flat, around 91%. And then we've continued to increase our small, medium-sized shippers as a percent of total. It's around 28% of total revenue. That's up from 25% a year ago.
Brian Ossenbeck (Equity Research Analyst)
Yeah. Okay, great. Thanks, very helpful. Appreciate it.
Operator (participant)
Thank you, and your next question comes from the line of Jason Seidl from TD Cowen. Please go ahead.
Jason Seidl (Equity Research Analyst)
Thanks, operator. Morning, Alain.
Alain Bédard (Chairman, President and CEO)
Morning, Jason.
Jason Seidl (Equity Research Analyst)
Wanted to touch base a little bit on the data center comments, and I think you called it out in a previous release, and you guys typically don't do that. Maybe you can dig a little bit deeper.
Alain Bédard (Chairman, President and CEO)
I know.
Jason Seidl (Equity Research Analyst)
Let us know sort of how big you think this can get for TFI.
Alain Bédard (Chairman, President and CEO)
Well, you know what, Jason, like I said, I mean, right now, before this acquisition that we did late 2025, I mean, we were only servicing the data center world, okay, through our Texas operation at Lone Star. Okay, and this is, this is something new for those guys. It's like it's something new for the industry in general. So because these guys used to be big with wind and energy in Texas. So, so now we're saying, "Okay, this is great, but how about data centers?" So we are kind of very close to, what's the, what's this builder? Bechtel. Bechtel, okay?
So we're trying to work very closely with those guys, but now with this new acquisition that we just made late in the year, those guys that are operating more like in the Michigan area. Those guys are also very close to a builder there that's been awarded two data center, one for Meta, one for Google. And hopefully we could continue to work for this builder, okay, to support him in those two data centers. So this is could be a win for us if ever our team is successful out there. So this is what we're trying to do, is build some kind of a recipe partnering with the builder of those center, like the Lone Star guys are with Bechtel, and our guys up north are with a different builder.
So this is, this is what we're trying to do. And then once this is, this, data center has been completely built, they will need servicing, right? So that's also something that we're trying to get into, and to grow that business. We have lots of experience in, in Texas with Lone Star in, in moving very expensive... Like, we did a move for one of the energy company, ConocoPhillips, that was valued at about, just doing the move, if I remember correctly, it was, like, close to $1 million just to move this kind of equipment, right?
So these guys are really good at what they're doing, and it's just like, okay, guys, so good for wind, good for energy, for the oil sector and all that, but data center is the new thing, so let's get up and running on that.
David Saperstein (CFO)
Well, and the approach is to approach this as a consolidated group, right? And we have one of the larger flatbed fleets in the U.S., over $1 billion of U.S. flatbed revenue. And we are going to market for the large customers as one, so that they are able to get that nationwide service. And so it's around the energy, it's around the construction, it's also around the high value. These, a lot of the materials are high value, need to be on time, and so we have that skill set with the DoD top secret work that we do, high value freight as well.
Jason Seidl (Equity Research Analyst)
Makes sense, David. My follow-up Alain, you touched on continuing to do acquisitions. There's been a lot of articles out that 2026 could be a big M&A year for the logistics group in general. Maybe talk a little bit more about that. I mean, are you still targeting a larger acquisition this year, or is that gonna be something that's more of a 2027, 2028 event?
Alain Bédard (Chairman, President and CEO)
You know, Jason, in order to do a deal of large size you got to be patient, and like I've always said, you make your money in the buying, never in the selling. So the price has to make sense and all that. So for sure, I mean, we could do something of size the end of 2026 into 2027. But there again, I'm looking at what's going on with everything that's going on in the market right now, with on the parcel side and even on the LTL side. So you'll probably see us do some, in 2026, do some kind of smaller deals, okay? Like the one we just did late in Q4.
We just did one small deals in Minnesota to add to our Transport America division. Okay, that makes a lot of sense. We may be doing some smaller deals in the LTL world, in the U.S. So large deals takes time, right? And we have to be very careful. And like I said earlier, until we have a deal between the three countries, okay, NAFTA kind of deal, right? Until we have that, it's very difficult to do a deal of size because you don't know what the rule is gonna be. So this is why I'm saying it's impossible to do something now. Maybe possible by the end of 2026, but probably more like 2027.
In the meantime, because of our Free Cash Flow generation, we'll keep continuing to do smaller deals, okay, where the risk is different, okay, now, because of too much unknown on the deal between the three major partners in the world, which is U.S., Canada, and, and Mexico.
Jason Seidl (Equity Research Analyst)
Yeah, makes sense. Alain, you mentioned smaller deals on the LTL side. Would this be like buying cartage agents?
Alain Bédard (Chairman, President and CEO)
No, I would say it's probably a. I'll give you an example. You buy a small Texas regional guy, as an example, okay? Or you buy a, a regional guy in, in the North, in the Northeast, which is close to Ontario, Quebec, right? So that- that's what I'm saying by smaller deals. So it's not a national carrier. It, it could be a strong regional guy that covers one state, like Texas, or cover two or three states in the, in the Northeast. This is, this is more, okay, what we are trying to do right now, because a large deal in the U.S. LTL, for us, it's, it's not possible right now.
Jason Seidl (Equity Research Analyst)
Makes sense. Appreciate the time, as always, gentlemen.
Alain Bédard (Chairman, President and CEO)
Pleasure, Jason. Thank you.
Operator (participant)
Thank you. And your next question comes from the line of Tom Wadewitz from UBS. Please go ahead.
Thomas Wadewitz (Senior Equity Research Analyst)
Yeah, good morning.
Alain Bédard (Chairman, President and CEO)
Morning, Tom.
Thomas Wadewitz (Senior Equity Research Analyst)
Yeah, good morning, Alain. Good morning, David. Wanted to try to drill down a little bit on the non-domiciled CDL impact and how to look at that in your business, right? so truckloads is an extremely large market where we expect a supply-side benefit, but the benefit might be different in dry van versus specialty in flatbed. So do you have a sense of kind of how much, non-domiciled CDL has impacted specialty flatbed? You were mentioning some of the skill sets are a little more unique in specialty.
Alain Bédard (Chairman, President and CEO)
Yes.
Thomas Wadewitz (Senior Equity Research Analyst)
I'm just trying to get a sense of like, well is this really gonna cause capacity to come out in dry van, and then there's maybe less pricing impact to you? I know there's somewhat fungible, but just trying to get a little more sense of kind of how you would see the driver impact, and whether you think there is a lot of activity in supply and specialty that's actually non-domiciled. Thanks.
Alain Bédard (Chairman, President and CEO)
Yeah. That, that's— You know what, this, this is a really good question because so far, okay, we see way more, okay, on the van side than on the specialty truckload side because what you just said. I mean, the specialty, let's say on a flatbed or on a, like, a tanker operation, there's more than just driving the truck, right? Whereas the van, you just pick up a trailer and you drive, right? So it's much easier than to put to tarp a load on a flatbed, right? So I don't know that, Tom, so far. It's very hard to put a finger on what the effect of that's gonna be.
But one thing is for sure is that we'll probably not see as much benefit as the van, because m- us, it's probably less of an issue for our world, but it's a little bit like a domino effect, right? So, once the spot moves, okay, on the van, it starts to move on the reefer, we see also some movement on the price on the flatbed side. The over year, it's starting to move. So I don't know if exactly is, is it because the supply is constrained or is it the demand that's more? My feeling would be more like not the demand, because the demand in my mind is still very soft and weak, excluding the data center thing there or the energy sector.
But I think it's an issue of the supply that's starting to constrain, because our revenue per mile, although we still have some of our division that are not doing well on a revenue per mile basis because of market condition, but overall, okay, our revenue per mile is improving. I mean, in Q1, okay, I think we're gonna start to see those improvement because we did not improve in Q4, that's for sure. I mean, we-- I've never seen a specialty truckload OR at 93, which is worse than my van 91 OR in Canada. This is not acceptable. Absolutely not. But there's market condition to that. So that should we should see some improvement there. And is it because of the demand or is it because of the supply? I think it's a little bit the supply.
Demand will probably improve over the course of 2026, 2027. CDL, is that helping us as much in the specialty world versus the specialty truckload world than the van world? I think that probably it's a huge more benefit to the van world versus the specialty, but we're still getting, I think, improvement because our revenue per mile is improving year-over-year as of now.
Thomas Wadewitz (Senior Equity Research Analyst)
Okay, that's great. Thank you. And then quick one for David, or one or two for David. Just I wanna make sure I understand your comments on US LTL in 1Q. So if you see flat year-over-year shipments, then that would imply, I wanna say, like 3%-4% growth in shipments per day, 1Q versus 4Q. So that would be a kind of a meaningful improvement. So I don't know if you were saying kind of flat shipments, sequential or year-over-year. And if you're saying flat year-over-year, what might be driving the kind of, the improvement in activity? Thanks.
David Saperstein (CFO)
Well, so it would be potentially flat year-over-year. Again hard to say what's gonna happen in March, but that was what it was. The comment was with regard to year-over-year. What's driving the improvement is the sales team, the service, and all of the things that we've been working on over the course of the past year. Now, the revenue per shipment may not be positive, right? And that's why we're looking at we'll see where the revenue per shipment is relative to year-over-year. But there is pricing pressure out there, and so that's gonna be the offset to what could be strong volumes or stronger volumes as it relates to the profitability contribution.
Thomas Wadewitz (Senior Equity Research Analyst)
100 basis point comment on weather impact, that's a full quarter impact in U.S. LTL.
David Saperstein (CFO)
Yeah. Yeah, we're estimating that we've lost like $5-$6 million already on the weather, just through extra overtime and just inefficiencies and cleaning up the dock and it's all that cost.
Alain Bédard (Chairman, President and CEO)
Yeah, versus a normal environment, because, Tom, see, the issue of the weather, we always have weather in Q1, so this is not something that we normally talk about, but this year it's special because it affected our big market, which is Northeast, Midwest, and Texas, right? So if the weather is an issue in Idaho or in Utah, but not too big for us, right? But when it affects Chicago, when it affects Dallas, when it affects New York, I mean, this is, this is really, really difficult because Dallas, we were shut down for three days because of the ice. So what David is talking about, $5-$6 million, this is over and above what we consider to be a normal environment of weather.
I mean, this is—we're not saying that, oh, because we had— No, no. This is exceptional for this year because weather was really bad in our major sector, okay, for, excuse me, TForce Freight.
Thomas Wadewitz (Senior Equity Research Analyst)
Right. Right. Okay, totally makes sense. Thank you for the time.
Alain Bédard (Chairman, President and CEO)
Pleasure, Tom.
Operator (participant)
Thank you. And your next question comes from the line of Konark Gupta from Scotiabank. Please go ahead.
Konark Gupta (Equity Research Analyst)
Hi, Alain and David, team. Maybe just the first one, on the earnings side of things. I mean, like, as we kind of look into the back end of 2026 hopefully conditions improve, but is Q4 going to face a tough comp from like the $1.90 EPS you reported for Q4 of 2025? I mean, if I'm looking sequentially, you have like effectively a drop of 50% in EPS from Q4 to Q1 as guided. And that's a little bit wider than what you typically see, right? So I'm just trying to make sure like we're not missing anything when we are comping or lapping the Q4 2025 and Q4 2026.
Alain Bédard (Chairman, President and CEO)
Okay. So I think, Konark, that Q4, okay, 2025 versus 2026, I think that we're gonna be in a different position, okay, versus this year, versus 2025. Reason being that I believe that our logistics will do way better, in Q4 2026 versus Q4 2025, because our customers will be busier. Talking about the OEMs, the truck manufacturers, okay? And also the fact that we've added, as an acquisition late in Q4 2025, a great company in our logistics sector. So this is why on the logistics side, I think that we're gonna do way better, okay, Q4 versus 2025, 2026. On the truckload side, it's still, I'm convinced that we're gonna do better because I've never seen 93 OR, and we're taking some action, okay? I'll give you an example.
One of our division on the West Coast, which we're doing really well, okay, with certain accounts, like the aerospace. So we have Boeing as a customer, over there. We have Bombardier as a customer, too. So we're doing really, really well with those guys, but we're doing so poorly with some other customers. So we took the bull by the horn, and we said, "Guys, no, no more of that." Right? We have also another division that's from Daseke, that is doing really well with one sector of their business, but they're doing really poorly with another sector. So there again, we're gonna take action there. So this is why, to me, I think that Steve and his team understand that we can't run a specialty truckload with a 93 OR.
This is completely unacceptable, and we're taking action over and above what we think that we're seeing some early signs of market improving. On the LTL side, like David was saying, I mean, the big focus of Kal and the team there is really to improve our service, okay? And we are. We are improving our service. So as an example, we move way more freight on the road versus the rail. So the rail miles within TForce Freight are down to about 20%. When we bought UPS Freight, these guys were 38%-40% on the rail. So for sure, you move freight on the rail, you don't know, you don't control the service because this is the rail. Whereas if you do it yourself on the road, well, it's under your control.
So we are improving our service as an example, just moving rail to road. Now, like I said earlier, because we move that on a van, and the van, okay, world's rate per mile is moving up, like we were talking about, this environment is changing. It's also a little bit of pressure on our costs because where we used to pay, let's say, $2.20 a mile, now, okay, you could be stuck paying $2.50-$2.70 or $2.80 a mile, depending on the lane, right? So, a little bit of pressure on that for us, but for sure, with better service, I believe that, our commercial team, with Chris and the rest of the boys there, will help us grow, for the first time organically in 2026, year-over-year. Right?
So this is why you look at what we're saying about Q1. I think it's exceptional, what we're seeing, because it's still a very tough environment. Our customers don't know what's gonna happen in the future because until we have a deal, like I said earlier, between U.S., Canada, and Mexico, a lot of guys are sitting on the fence. Because don't forget, I mean, TFI is a U.S. carrier for about 75% of our revenue, but 25%-30% of our revenue is Canadian, right? So a lot of our Canadian customers, they don't know, okay, what the future is. And also some of our U.S. customers, they're facing a tough time selling to Canada right now.
So all of that being said, when we come up with $0.50 in Q1, it looks really bad versus $1 in Q4, but it's a special environment, okay, and we're cautious.
Konark Gupta (Equity Research Analyst)
That's a great color. And, if I can follow up maybe on logistics. I think you mentioned that, sequentially speaking, at least logistics margin expanded from Q3. And-
Alain Bédard (Chairman, President and CEO)
Yes, it did.
Konark Gupta (Equity Research Analyst)
I wasn't surprised to see that. So any color you can share in terms of what's driving this improvement? I mean, is it early days or is it the mix, or is there something else? Like, how should we extrapolate this performance at logistics into 2026?
Alain Bédard (Chairman, President and CEO)
Yeah, I think, Kornak, that you see us improving during the course of 2026. Like I said, because of this acquisition, okay, that we did, because of our one of our large customer, the OEMs, are also gonna be busier. Our Canadian logistics is doing pretty good. we we have a great business there. Our U.S. logistics is under a little bit of pressure with what's going on in the truckload sector in the U.S., where the rates are starting to move up on the spot.
So you try to get a truck, it's a little bit more money, and you're stuck with contracted rates with customers, and these guys want to extend those contracts, and we're saying, "Well, no, because the market is changing." So on the U.S. side, a little bit more pressure, okay, on our profitability there, maybe for the next few months. But all in all, I feel really good about where we're heading with our logistics. Logistics for us with this new acquisition and a few things that we're working on, should do better in 2026 than in 2025. Absolutely. The other thing also that's worth mentioning is that if you look at our truckload brokerage operation in the U.S., I mean, the revenue is up, okay, and it will continue to grow.
So this is one area of focus of Steve and his team, is to grow more of this asset-light operation versus asset-heavy operation, and get a better mix like we have in Canada. So we, in Canada, we want a hybrid model where we have our own assets, okay, but we also generate a lot of revenue without any assets. When we bought Daseke, they were doing some of that, but not a lot. So the goal during 2025, 2026, and 2027 is to grow the share of the asset-light operation, share of revenue, okay, versus the total revenue of the company. So you, you're way better positioned to improve your return on invested capital because when you don't buy steel, your capital cost goes down. If the profitability or the revenue remains the same, your return on invested capital improve.
And this is when we talk to the truckload team. They say, "We can't run a single-digit return on invested capital, guys. I mean, if you do that, the future is bleak." So we got to do something. The market will help us, yes, but we need to help ourselves too.
Konark Gupta (Equity Research Analyst)
I appreciate the time and color. Thanks a lot.
Alain Bédard (Chairman, President and CEO)
Pleasure, Kornak.
Operator (participant)
Thank you. Your next question comes from the line of Bruce Chan from Stifel. Please go ahead.
Bruce Chan (Equity Research Analyst)
Hi, good morning, gents, and thank you, operator. Alain, you made some helpful comments around the road to rail shifts in LTL. I think that makes a lot of sense for service. Maybe you could also remind us of what percentage of line haul miles are currently outsourced on the LTL side, whether that's to truck or rail. And then given your fleet investments, do you have any plans to bring that number down this year?
Alain Bédard (Chairman, President and CEO)
Yeah. Yeah, so what we do is about 20% on the rail, 20, 22% on the rail, and then we have owner op, okay, and we have third party. So the third party and the owner op, probably our own guys do, if I remember correctly, David, tell me, correct me if I'm wrong.
Bruce Chan (Equity Research Analyst)
Yeah, our own guys are doing around 55, 55%.
Alain Bédard (Chairman, President and CEO)
Fifty-five. Yeah.
Bruce Chan (Equity Research Analyst)
Yeah, so it's 45 outsourced.
Alain Bédard (Chairman, President and CEO)
Yeah. And out of the 45 outsourced, 20 of that is rail.
Bruce Chan (Equity Research Analyst)
Yeah.
Alain Bédard (Chairman, President and CEO)
25 is third party. Owner op and third party.
Bruce Chan (Equity Research Analyst)
Okay, great. And then just maybe broad plans if you're comfortable with that number, as far as it suits your model or, or whether you plan to bring that down over time.
Alain Bédard (Chairman, President and CEO)
Listen, I mean, for sure, okay, if you haul... Your average length of haul is 1,000 mi and more, you have to have some rail, right? So I cannot answer, is 20 the right number? I would say we're getting close to the right number if the average length of haul stays above 1,000 miles. Now, one thing is for sure is the 55%, like David was mentioning with our own guys, that could grow probably closer to 60%, okay, over time. Yes, because you have better control when it's your own people. But the rail at 20%, we're probably close. If we remain at over 1,000 miles, we're probably close to the best that we could do. Now, again, this is going back to the average weight per shipment, that we went from 1,075 to 12 something.
The average length of haul is down a bit, but the discussion I'm having with Kal and the rest of the team is over time, okay? We need to change our approach to the market and reduce, over time, the average length of haul so that we don't touch the product three or four times. We touch the product less. So in order to touch the product less, you have to do less miles, less on the average length of haul, right? So it's an evolution, okay, that's gonna take place over time. But there again, what I'm saying, if you run over 1,000 miles, you need the rail.
Bruce Chan (Equity Research Analyst)
Makes sense. Thank you.
Operator (participant)
Thank you. And your next question comes from the line of Ken Hoexter from Bank of America. Please go ahead.
Ken Hoexter (Managing Director)
Hey, good morning, Alain and David. So, Alain, maybe just a bit of a contrasting message, so maybe some clarity. You noted a weak environment, but 1Q should be flat after a down 7% ton and down 11% shipment quarter. So maybe clarity on what's driving that near 50% EPS downtick in the first quarter, and then you threw in, "Hey, it's conservative. We could do better." So is it just the weather that's stepping you back, or are there gains in the fourth quarter or any impacts from the fourth quarter acquisitions in there? Maybe just some clarity on it. Thanks, Alain.
Alain Bédard (Chairman, President and CEO)
Yeah. So, David, you want to give some clarity to Ken on that?
David Saperstein (CFO)
Yeah, sure. I mean, look, look, Ken, the in terms of gains or anything special in the fourth quarter, the only thing special in the fourth quarter was tax for about $5 million. Other than that, it's there was nothing one time in nature. You know, in terms of what's driving is the trend of volumes up. It's the work that the team's doing. What may still weigh on the profitability, though, is the revenue per shipment. And so that's why the growth in volume may not be as profitable as otherwise would be. We'll just have to see how that plays out.
Then, more broadly, it's very, very difficult to, especially in TForce Freight, forecast the first quarter because all the money is made in March. That's just the nature of this business. So when we're looking at a January and February that were very difficult, or at least January very difficult with the dynamics that we've talked about, there's a lot that's unknown. So we've done the best that we can, and we are being conservative about what March might be when we put together that guidance.
Ken Hoexter (Managing Director)
Okay. That was flat on-
David Saperstein (CFO)
Yeah.
Ken Hoexter (Managing Director)
That was flat on shipments or on tonnage? I think you said both through the- I'm sure I'm getting.
David Saperstein (CFO)
The shipments. year-over-year-
Ken Hoexter (Managing Director)
Shipments.
David Saperstein (CFO)
Potentially, on shipments. Yeah.
Ken Hoexter (Managing Director)
And then you previously noted, I think, 200-300 basis points of margin improvement at LTL in a flattish environment. It, it-- I think you mentioned if, if we're starting off flattish in 1Q, does that mean you're looking flattish for the year, and does that... or, or is it too big a hole, and, and so that 200-300 basis points for the full year is, is too big, or is that still achievable, Alain, in, in your, your outlook? A- and, and how about EPS? Are you then looking for it to be at least up in, on a year-over-year basis?
Alain Bédard (Chairman, President and CEO)
Yeah. So, so in terms of the volume, like I said, Ken, I think for the first time, 26 in our U.S. LTL, we should see a little bit of organic growth, okay, on the shipment count, right? On the weight, we believe that it's gonna be about flat or up a bit. On the revenue per shipment, like David was saying, okay, right now, what we're seeing is a little bit of pressure on the revenue per shipment when we look at Q1 so far, and but the team is working to correct that, okay? It's not like we accept that. No, no, no, no, no, no. Cal, we cannot live with $5 less a shipment or whatever it is. No, no. I mean, don't forget our GRI, which is small, okay?
It's a small number of shipments, right? But we didn't do any, but we're doing one in mid-March, okay? Most of our peers have done theirs earlier than us, and us, we waited, okay? We waited because we want to continue to improve our service, so there's no, there's less issue with customer when you talk to them about asking for more money. So this is why we're doing that mid-March. Okay, fine. So if we go back to the year in terms of global TFI, in my mind, for sure our plan is we will deliver better OR or EPS in 2026 versus 2025. Without a doubt, that's our plan. Because our—like I said, our logistics will definitely improve. That we have visibility. We know, okay, where the OEMs are going because we talk to them, okay?
We know that it's gonna be weak for the first six months, year-over-year in 2026 versus 2025, but the latter part of the year, we're gonna do way better in Q3 and in Q4 versus 2025. Okay, so we are suffering a little bit in that business in Q1 and in Q2, year-over-year. In our truckload, we've talked a lot about that. I mean, I'm convinced that we're not gonna deliver a 93 OR, okay, in Q1. We are improving our year-over-year basis in Q1 and during the course of the year. And on the LTL side, I mean, we are taking some actions there, okay? Improving our service, organic growth, small. I think that we'll do a better job in 2026 as we've done.
Now, we've said it clearly, and this is why our guidance is only $0.50-$0.60, that we had a difficult start of the year. Okay, not just in U.S. LTL, in truckload as well, and logistics, because some of our customers are not that busy. So this is why, this is what we believe is achievable, okay? And hopefully, we do better than that.
David Saperstein (CFO)
Yeah. And the other thing I would point out on the full year is that in truckload, we've done a lot of work in 2025 to reduce the capital intensity of truckload, because we had way too much equipment. And so depreciation expense will be lower in the truckload in 2026 than it was in 2025. And you can actually already see that if you look at the D&A of truckload, just in Q4, it's $3 million lower than it was the year prior, and lower as a percentage of revenue as well, right? So there's real efficiency as it relates to the capital there, and that's gonna continue into 2026, and the impact would probably be higher in 2026 than $3 million a quarter.
Alain Bédard (Chairman, President and CEO)
Yeah, because if I may add, guys, our revenue - if I remember correctly, our revenue per truck in Q4 is better, even with-
David Saperstein (CFO)
Yeah
Alain Bédard (Chairman, President and CEO)
rates per mile that are not that better.
David Saperstein (CFO)
Yeah. Yeah, exactly.
Alain Bédard (Chairman, President and CEO)
So velocity is more.
Ken Hoexter (Managing Director)
Yeah. Great. Appreciate the thoughts. Thanks, guys.
Alain Bédard (Chairman, President and CEO)
Thank you.
Operator (participant)
Thank you. Your last question comes from the line of Cameron Doerksen from National Bank. Please go ahead.
Cameron Doerksen (Equity Research Analyst)
Yeah, thanks. Good morning. I just wanted to, I guess, follow up on M&A. You mentioned a few times the acquisition you closed in Q4, I guess, the Hearn Industrial. I mean, obviously not huge, but you cited it a couple of times here as a really great fit. Can you just talk a little bit about that business? Because it looks like in your disclosures that not a huge from a revenue point of view, but a pretty good margin profile for that business.
Alain Bédard (Chairman, President and CEO)
Well, you see, I mean, those guys are doing a great job. I mean, they are entrepreneur, and I think that what these guys are doing today is great, and I think that the potential for being part of the TFI family is gonna help us help them and us, okay, do even better in the future. So, this is something new for them. I'll give you an example: They don't touch freight. I mean, they do a lot of work for the automotive business, but they don't touch freight, but they have a certain degree in the freight, so that's something new for them, right?
So for sure, they are in touch with our JHT division, okay, because these guys have a lot of capacity that could be used to deliver freight for those guys. So there, there's gonna be some great synergies, I think, between members of the family, with the truckload sectors and all that. And for sure, these guys are lean and mean operators, very successful guys, and yeah, I think it's gonna be a great acquisition in our logistics sector. A little bit like the JHT and the other ones that we've done in the logistics sector.
Cameron Doerksen (Equity Research Analyst)
Okay. No, that, that's helpful. Maybe just a bigger picture, capital allocation question. I mean continue to be active with the tuck-in acquisitions. Just wondering if you've got kind of a target for leverage at year-end. I mean, still, still pretty comfortable here. Great free cash flow still expected in 2026, but just any guess targets there as far as leverage and, and just the capital allocation priorities.
Alain Bédard (Chairman, President and CEO)
Yeah. So, so capital is always the same thing. You know, if we don't do anything of size, we're gonna do probably, I would say 26, in 2026, $200 million-$300 million of M&A in terms of tuck-in, probably $200 million minimum, maybe up to $300 million. And then we get the dividend, and the rest, okay, we'll just use the cash to pay down debt or, depending on the stock valuation, do some, some buyback. I mean, we have the possibility of buying back, all the way up to 7 million shares, that we're approved to do. Now, again, 2.5 leverage, it's okay, but, we would prefer to bring that down to closer to 2 over time.
So let's say that we do about the same free cash as we did last year, we got the dividend, we've got the M&A, so then, for sure we'll be reducing our leverage if we don't do any stock buyback. So re-leverage, I don't remember the plan, David, so where do we end up? We're closer to 2 than 2.5.
David Saperstein (CFO)
Yeah, no, no doubt. And the other thing we'll point out, and we actually added this into the MD&A, where just under the table where we show the leverage ratio. That leverage ratio is calculated according to the way that our banking covenants are calculated, and it includes two things that you know some investors may not consider leverage. One is letters of credit, and the second is the book value of earnouts, right? Which are subject, of course, to the future performance of target companies. So those numbers are a little bigger than they have been in the past, and so that's why we set them out in the table.
And so you can see that, and you can work out by backing those out, what, let's say, the real economic leverage of the company is, which is a little lower than is presented in the banking syndicate.
Alain Bédard (Chairman, President and CEO)
Yeah. With these numbers, David, I think we're at 2.2, right?
Cameron Doerksen (Equity Research Analyst)
Okay. No, that's great. Appreciate, appreciate the time. Thanks.
Alain Bédard (Chairman, President and CEO)
Pleasure, Cameron.
Operator (participant)
Thank you. There are no further questions at this time. I will now hand the call back to Alain Bédard for any closing remarks.
Alain Bédard (Chairman, President and CEO)
Thank you. So all right then, thank you very much, operator, and thank you everyone for being on today's call. We appreciate your interest in TFI International, and we're both confident in our position and enthusiastic about what 2026 will bring. As always, please reach out if you have any additional questions. I look forward to seeing many of you on this year's conference circuit. Enjoy the day, and we'll be in touch. Thank you.
Operator (participant)
This concludes today's call. Thank you for participating. You may all disconnect.