Cargojet stock is still a buy, this analyst says

Cargojet’s (Cargojet Stock Quote, Chart, News, Analysts, Financials TSX:CJT) second-quarter results showed steady growth despite missing revenue expectations, leading Beacon Securities analyst Donangelo Volpe to maintain his “Buy” rating and $155.00 price target in an August 8 note. Adjusted EBITDA and EPS met forecasts, providing some offset to the top-line shortfall.

Consolidated revenue rose 3% year over year to $238-million, falling short of Volpe’s $250 million estimate and the $248-million consensus. Core domestic, charter, and ACMI (aircraft, crew, maintenance, and insurance) operations generated $205-million in revenue, a 7% year-over-year increase and largely in line with projections.

“Following the Q2 results, we have made minor revisions to our FY25 estimates and have introduced our FY26 estimates,” he said. “For Q3/25, we are forecasting revenue of $248M, Adjusted EBITDA of $80M, and Adjusted EPS of $1.05. Following the introduction of our FY26 estimates, we maintain our Buy rating and PT of $155/sh, which is based on a 9.5x FY26 Adjusted EBITDA multiple.”

Volpe expects Cargojet to post $338.0-million in Adjusted EBITDA on $1,031.0-million of revenue for 2025, rising to $357.4-million in Adjusted EBITDA on $1,103.2-million of revenue in 2026.

Mississauga-headquartered Cargojet is an air cargo carrier that operates a domestic overnight network connecting major cities, as well as international routes to the Caribbean, Europe, and other destinations.

“Breaking it down, domestic network revenue totalled $102M, up 14% y/y, with the increase driven by e-commerce (outperformance through Amazon contract) and B2B volumes throughout the quarter,” Volpe said. “We expect continued strength in this segment as e-commerce penetration increases in Canada, more in line with other geographies. All-in charter revenue was $40M, up 21% y/y, as a result of scheduled charter services between China and Canada. An average of three flights per week were scheduled throughout the quarter, and we anticipate a pick-up in activity closer to five flights per week throughout peak season in the back half of the Year.”

Cargojet’s ACMI segment generated $63-million in revenue in Q2, a 10% decline from a year earlier, reflecting the shift of aircraft away from longer-haul Asia and Europe routes toward South America. Beacon Securities sees the possibility of some routes returning if new U.S. trade deals with Asia or Europe are finalized. The changes reduced block hours by 10% year over year, though activity is expected to normalize in the second half of 2025. Adjusted EBITDA reached $80 million, up 1% from last year and matching estimates.

“The 34% Adjusted EBITDA margin was slightly down y/y but came in well ahead of expectations as the company continues to reap the rewards of its optimization efforts,” Volpe said.

Volpe highlighted two key developments for Cargojet. First, the company extended major customer agreements. In July, it renewed its strategic deal with Amazon for four more years to March 2029, with an option to extend to March 2031. It also extended its DHL contract to March 2033, replacing earlier warrants for 1.6 million shares with new warrants for up to 1 million shares at $93.61, vesting over eight years based on delivering $3.2-billion in business volumes.

“We view the agreements favourably, as interests are aligned with key customers and we believe the long-term relationships have been strengthened,” Volpe said.

Second, Cargojet expects to turn free cash flow positive after Q3/25. Strategic fleet changes included adding two converted B767-300 aircraft to its operational fleet, with a third due in Q4, and acquiring a factory-built freighter entering service in Q3. A year-to-date free cash outflow of $118-million should be offset by selling two older B767-300s and generating operational cash. Management reaffirmed 2025 capex guidance of $160–$180-million for maintenance and $80–$85-million for growth.

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