Buy TTNM stock on weakness, Haywood says

With the stock trading near 52-week lows, Haywood analyst Gianluca Tucci says you should be buying Titanium Transportation Group (Titanium Transportation Group Stock Quote, Chart, News, Analysts, Financials TSX:TTNM).

In a research update to clients February 22, Tucci maintained his “Buy” rating and price target of $5.25 on TTNM.

“With TTNM hitting a 52-week low, we take this opportunity to revisit our outlook, thesis and highlight the widened (& material) valuation disconnect to intrinsic value and its transportation peers,” Tucci wrote. “We also took the opportunity to connect with management, who provided us a sense of comfort that Q4/23 and thus far in Q1/24 are on-trend and as expected. The Company is committed to paying down its Crane acquisition debt, which we continue to view as manageable.”

The analyst thinks TTNM will post EBITDA of $50.1-million on revenue of $436.7-million in fiscal 2023. He expects those numbers will improve to EBITDA of $56.4-million on a topline of $481.2-million the following year.

Tucci says the headwinds that TTNM has faced may be set to settle.

“2023 was certainly a difficult year for trucking companies,” he noted. “From record highs in 2021, TL rates continued their downward trend. Three primary challenges resulted in a difficult transportation market in 2023; (1) a macroeconomic shift in consumer spending patterns, (2) an oversized pool of capacity, and (3) continued increased operating expenses for trucking enterprises. Despite hope for a “V” bottom, we believe 2024 will be similar to 2023. While the Department of Transportation registration numbers don’t yet reflect a mass industry exodus, there has been very high turnover within trucking fleets over the past year. Historically, high turnover is the first sign of capacity leaving the market at scale. We believe a good amount of capacity will continue to leave the trucking industry in H1/24 spurred by continued softness in demand, depressed rates and sticky opex. This correction should help balance supply and demand at some point in H2/24 with a lack of significant change in freight rates until the latter part of the year. TTNM’s main Canadian listed peers (TFII-TSX & MTL-TSX) both reported in-line to slight beats in Q4/23 results and with both foregoing issuing annual formal guidance due to market conditions, it would not surprise nor worry us if TTNM followed suit and did not issue formal guidance for 2024 alongside Q4 results in March.”