Range from 20 - 90% above the current price. GLTA
While investors rewarded Monday’s release of Cargojet Inc.’s first-quarter results with a 3.9-per-cent share price gain, equity analysts took a more pessimistic view of the report, which fell short of their expectations and was accompanied by a more conservative near-term outlook.
The Mississauga-based company reported revenue of $231.9-million, down 0.7 per cent year-over-year and below the consensus forecast $237.3-million. Adjusted fully diluted earnings per share dropped 37.8 per cent to 97 cents, also under the Street’s projection of $1.15.
“Q1/23 results came in below ATB estimates, mainly due to softer-than-expected volumes on the domestic network,” said ATB Capital Markets analyst Chris Murray. “Management noted that volume trends weakened more than anticipated in late Q1, with the Company’s revised outlook calling for volumes to be more in line with 2022 levels. We have moderated our growth expectations for 2023 within the Company’s domestic network to account for prevailing conditions. Our revised numbers now call for growth to remain neutral in the segment (previously 5-per-cent growth).”
While emphasizing that “moderating growth outlook,” Mr. Murray did maintaing his “constructive long-term view” on Cargojet Inc. , seeing “valuations remain compelling for a high-quality GARP [growth at a reasonable price] name.”
However, he dropped his target for Cargojet shares to $130 from $190 with an “outperform” rating. The average is $154.50.
“Management guided to flat growth across the domestic network in 2023, with ACMI [Aircraft, Crew, Maintenance and Insurance] expected to remain a source of growth given the anticipated full-year impact of its expanded partnership with DHL,” said Mr. Murray. “The Company is taking measures to better align capacity with the demand environment, including minimizing contract labour and overtime, and training costs, and adjusting block hours, which it expects to support margins in a lower-demand environment.
“Despite confirming an LOI for the sale of the third B777, we see the Company as well positioned to benefit from e-commerce-led demand trends and attractive supply/demand dynamics around international air cargo services while maintaining the flexibility (through control of the conversion slots) to add or defer growth capex depending on economic conditions over the next 12-18 months. We continue to view valuations as attractive, particularly given the secular tailwinds and the strength of the Company’s domestic franchise.”
Others reducing their targets include:
* National Bank Financial’s Cameron Doerksen to $127 from $140 with a “sector perform” rating.
“We remain positive on Cargojet’s longer-term growth prospects but do not see an obvious catalyst for Cargojet shares to move materially higher in the near term,” he said.
* Acumen Capital’s Nick Corcoran to $175 from $180 with a “buy” rating.
“CJT remains well positioned to navigate the uncertainty from a slowing economy. We will look for evidence of the cost controls in subsequent quarters,” said Mr. Corcoran.
* Scotia Capital’s Konark Gupta to $146 from $172 with a “sector outperform” rating.
* TD Securities’ Tim James to $175 from $180 with a “buy” rating.
* RBC’s Walter Spracklin to $202 from $231 with an “outperform” rating
* CIBC’s Kevin Chiang to $180 from $193 with an “outperformer” rating.