Cargojet Inc.
(CJT-T) C$197.05
Q3/21 First Look Event
This morning, Cargojet announced Q3/21 results. Adjusted EBITDA was $70.9 million, compared to our forecast of $71.5 million and consensus of $68.8 million.
Impact: NEUTRAL
We believe that the slightly stronger-than-expected revenue and Adjusted EBITDA relative to consensus, supportive environment for air cargo, and strong outlook for Q4 should be positively viewed by investors. However, labour driven cost inflation, which we believe can eventually be passed along to customers, could partially offset the benefits of the robust demand environment on investor sentiment.
Revenue increased 17% y/y to $189.5 million, in line with our forecast of $188.5 million. Domestic network revenue was moderately below our forecast while all- in charter revenue was above. Management cited additional scheduled charters to Europe as a driver of the surprising y/y increase in all-in charter revenue. Average volume per operating day increased 16% y/y and was in line with our forecast.
Adjusted EBITDA margin decreased 560 bps to 37.4%, in-line with our forecast of 38.0% and implied consensus of 38.4%. Excluding fuel surcharges and other cost pass-throughs, margin decreased 350 bps to 46.3%, below our 48.3% forecast.
Standardized FCF of $41.6 million was below our $67.5-million forecast. The difference was due to working capital, partially offset by higher-than-expected cash profit.
Fleet plan: Cargojet's formal fleet plan for the end of 2022 was reduced by one aircraft (we believe due to timing of delivery), and the year-end 2023 plan was increased by three aircraft (two 767-300s and one 757-200). The company does not typically take on new aircraft without a high degree of confidence that the aircraft will be used immediately.
Outlook: Management continues to expect ocean and ground-based transportation supply chain disruptions to manifest in short- to medium-term opportunities for air cargo, including in Cargojet's ACMI business, and that these opportunities will extend through the upcoming holiday season. 2021 capex is expected to be approximately $240-250 million (vs. TDe of $275 million) and 2022 is expected to be approximately $280 million, significantly higher than our current forecast which may be due in part to deposit requirements related to the disclosure of new aircraft acquisitions in 2023.