Following the company’s second quarter results, Beacon Securities analyst Ahmad Shaath has raised his price target on Cargojet (TSX:CJT).
On Monday, Cargojet reported its Q2, 2018 results. The company posted Adjusted EBITDA of $28.8-million on revenue of $109.0-million, a topline that was up 23.6 per cent over the same period last year.
“We are very pleased with the financial and operating results produced during the quarter,” CEO Ajay Virmani said. “The significant increase in revenues over the previous year was the result of the successful execution of our strategy to improve the utilization of our aircraft assets and to maximize margins. We continue to prudently manage our operating costs and look for further route network optimization opportunities. I would like to thank the entire Cargojet team for their continued dedication and commitment to excellence which has enabled Cargojet to be the leader in customer service, on-time reliability, and value to our customers across Canada and around the world.”
Shaath says CJT easily bested his expectations on both the top and bottom line, in what he regards as a great performance.
“The highlight of the results is the exceptional showing of CJT’s core overnight network, where the company recorded a stellar ~17% y/y growth, nearly 3x our expectations,” the analyst says. “This was driven by strength in e-commerce across the majority of CJT’s client base. Notwithstanding the extra operating day in Q3/FY18 vs Q3/FY17, the company reported ~10% y/y growth in average volume per operating day, the strongest rate since fully ramping up its operation post the Canada Post Contract win. This was on the back of the company’s first venture of expanding its core overnight network to the weekend (1 flight per week on Sundays starting May 2018), which the company expects to be a cornerstone of its operations going forward.
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In a research update to clients today, Shaath maintained his “Buy” rating, but raised his one-year price target on the Cargojet from $75.00 to $94.00, implying a return of 34 per cent at the time of publication.
Shaath thinks CJT will post Adjusted EBITDA of $125.2-million on revenue of $449.5-million in fiscal 2018. He expects those numbers will improve to EBITDA of $138.5-million on a topline of $479.9-million the following year.
“We continue to view Cargojet as the best investment vehicle to capitalize on the secular growth in e-commerce, with its reduced risk profile enhanced by near monopolistic market position and near-zero exposure to fuel price increases (passed through),” the analyst adds.