Bullboard - Stock Discussion Forum Cargojet Inc T.CJT

Alternate Symbol(s): CGJTF | T.CJT.DB.E | T.CJT.DB.F

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Cargojet Inc. is a Canada-based company, which is a provider of time-sensitive premium air cargo services to all major cities across North America. The Company also provides dedicated aircraft to customers on an aircraft, crew, maintenance, and insurance (ACMI) basis, operating between points in Canada, the United States of America, Mexico, South America, Europe, and Asia. The Company operates... see more

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TSX:CJT - Post Discussion

Cargojet Inc > RBC (FedEx Results)

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Post by retiredcf on Jun 27, 2022 9:17am

RBC (FedEx Results)

June 24, 2022

Cargojet Inc.
Connecting The Dots: CJT/TFII flash read-through – FedEx reports Q4 earnings

TSX: CJT | CAD 139.72 | Outperform | Price Target CAD 302.00

Sentiment: Neutral

FedEx reported Q4 earnings yesterday with adj. EPS of $6.87 in line with consensus $6.88. Overall, we view the read-through as neutral for both CJT (negative bias) and TFII (positive bias).

• CJT: neutral (negative bias). Key from FedEx results as it pertains to CJT was commentary highlighting anticipated weakness in B2C going forward offset by commentary that international pricing is expected to remain elevated into 2024. Overall, we are neutral on the read-through for CJT as Cdn eCommerce adoption is below that of other developed market countries, a market dynamic expected to support demand longer term in our view despite a potential slowdown in the US. We also note that elevated pricing into 2023 is directionally consistent with our expectations. Our negative bias however stems from commentary that crew cost per flight hour has been further elevated which we see as a potential margin headwind to CJT going forward.

• TFII: neutral (positive bias). FedEx Freight posted strong results, with freight yield per shipment up +28% y/y (which we note includes fuel surcharge but suggests strong pricing nevertheless). Overall, we view this as a neutral read-through for TFII as we believe investor focus remains on the demand outlook and a potential slowdown in volume during the remainder of the year. Our positive bias reflects upside to Q2 earnings at TFII on the back of strong results at TForce Freight.

What happened? FedEx yesterday reported Q4 earnings with adj. Adj. EPS of $6.87 up +37% y/y. Q4 results were up due to revenue management actions, including the favourable net impact of fuel at each transportation segment, and lower variable compensation expense. These factors were partially offset by lower shipment demand due to slower economic growth and supply chain disruptions, as well as higher purchased transportation and wage rates.

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