Is Cargojet stock a buy? (November, 2024)

Its third quarter results are in the books and Beacon Securities analyst Donangelo Volpe still thinks there is money to be made on Cargojet (Cargojet Stock Quote, Chart, News, Analysts, Financials TSX:CJT).

On November 4, CJT reported its Q3, 2024 results. The company posted Adjusted EBITDA of $82.2-million on revenue of $245.6-million, up 14.8%, year-over-year.

“The improving interest rate environment and controlled inflation are fostering a more stable and optimistic economic outlook for Canada which we believe bodes well for future domestic volumes,” CEO Jamie Porteous said. “While geo-political challenges continue to affect the overall transportation industry, we continue to find opportunities that are creating new sustainable revenue streams in fast changing global commerce. Yet, Cargojet is not immune to the headwinds of significant cost increases facing the aviation and the supply chain sectors.”

Volpe says there is plenty of room for expansion with the company’s existing infrastructure.

“At the beginning of the year, management indicated confidence in the ability to grow its business 15-20% with the existing aircraft fleet,” he wrote. “With its Q3 results, block hours were up 15% y/y utilizing the same fleet which we view favourably. However, the increase in block hours resulted in one-time start-up costs which tempered operating leverage for the period. The start-up costs impacted maintenance, crew and ground handling costs. We were impressed with the improvement in All-in charter revenues which saw 60% y/y growth attributable to scheduled charter services between China and Canada. As a reminder, CJT recently signed a three-year contract worth at least $160M (over the life of the contract) to operate flights between China and Canada for Great HK Express. The >$160M in revenue is based on the assumption of running three flights per week, however, we believe there is ample opportunity for expansion on this contract. On the earnings call, management highlighted that flight frequencies have increased up to 5-6x a week in Q4 but expect to return back to 3x per week during H1/25.”

In a research update to clients November 5, Volpe maintained his “Buy” rating and price target of $165.00, implying a return of 29% at the time of publication.

The analyst thinks CJT will post EBITDA of 330.0-million on revenue of $977.0-million in fiscal 2024. He expects those numbers will improve to EBITDA of $353.0-million on a topline of $1.04-billion in fiscal 2025.