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The crash in oil prices has had a ripple effect across the entire economy.
Energy companies were in the front line, obviously, but a wide range of unrelated businesses has been sideswiped by the international oil price war.
They range from companies with a strong Alberta base, as with Canadian Western Bank and Boardwalk REIT, to international firms, such as Canadian National Railway, which reported a 10-per-cent drop in petroleum and chemicals revenue in the first quarter.
One of the companies that saw its shares take a dive in the wake of the oil price decline was TransForce Inc., a Montreal-based transportation firm that operates across North America. Its shares were trading at over $30 early in 2015; one year later they were under $20.
However, the stock has since rallied and closed on Wednesday at $24.23.
The turnaround was a result of some rigid cost-cutting on management's part plus a refocusing on sectors of the business that were not energy-related. Here's an update on where the company stands now.
Background: TransForce is a North American leader in the transportation and logistics industry. The company operates across Canada and the United States, offering package and courier service, truckload and less than truckload haulage, logistics, and other services. In 2015, 16 per cent of its revenue was from Western Canada.
Stock performance: The year-long decline in the share price ended on Feb. 3 when the shares bottomed out at $18.94. At that time I wrote about the company in my Internet Wealth Builder newsletter, saying the shares appeared to be oversold and noting they were trading at a reasonable 12.5 times 2015 net earnings.
Recent developments: In announcing the company's year-end results in February, just after shares hit a four-year low, CEO Alain Bédard said the oil price drop "caused a significant decline in economic activity in Canada and a serious deterioration in the U.S. energy market." The company responded by cutting costs and reduced its exposure to operations affected by the downturn, such as by discontinuing unprofitable oil-rig moving operations.
Those actions paid off quickly. Although the shares were still falling, the company posted a profit increase of almost 28 per cent in 2015 with net income of $163.4-million ($1.60 a share).
That success carried on in the first quarter of this year. The company reported first-quarter revenue from continuing operations (before fuel surcharges) of $866.7-million, an increase of only 1 per cent from the year before.
However, adjusted net income from continuing operations was $31.5-million (32 cents a share), a solid improvement from $27.5-million (26 cents) in the same quarter last year. Free cash flow from continuing operations was $24.7-million compared to $18.7-million the year before.
Mr. Bédard said increased e-commerce activity in the United States contributed to the profit gains although the weak Canadian economy was a drag on results.
During the quarter the company sold its Waste Management operations for $800-million, generating a pre-tax gain of $559.2-million. The proceeds were used to retire some debt and to repurchase 2.9 million common shares.
"TransForce now has greater financial flexibility and will use free cash flow to further reimburse debt, repurchase shares, or proceed with selective acquisitions," Mr. Bédard said.
Dividend: The stock pays a quarterly dividend of 17 cents per share (68 cents per year) to yield 2.8 per cent at the current price.
Summation: The company has shown its ability to cut costs and increase profits despite the oil price cut and the weak Canadian economy. Ask your financial adviser if it is right for your account.
Gordon Pape is Editor and Publisher of the Internet Wealth Builder and Income Investor newsletters. Follow him on twitter @GPUpdates and on Facebook.
Gordon Pape