The Return Of Growth Our Conclusion
CJT’s results highlight the underlying strength of its business and its ability to
grow despite a still soft freight market. More impressively, we have CJT’s adj.
2024E EBITDA exceeding its pandemic highs, which speaks to the resiliency
of its operating model. We maintain our Outperformer rating and our $172
price target.
Key Points
The Return Of Growth: Despite the ongoing freight recession, CJT’s core
revenue (Total Domestic, ACMI and Charter) is now up Y/Y for four quarters
in a row. This speaks to the resiliency and the moat around its revenue. This
is also the second quarter in a row where both revenue and EBITDA are up
Y/Y. The results in Q2/24 also address a pushback we heard when revenue
turned positive in H2/23 – that this was just driven by CJT’s non-domestic
segments which are lower quality. We disagree with this view as we make
the case that CJT runs a network. Nonetheless, CJT is now seeing growth
across all of its segments. Domestic network revenue was $89MM, up from
$81MM in Q2/23 and versus our estimate of $86MM. The company notes the
Y/Y increase was due primarily to an increase in e-commerce and B2B
volumes during the period, and contractual customers’ consumer price index
increases. ACMI revenue was $69MM versus $64MM in Q2/23 and our
estimate of $71MM. The increase was primarily due to additional aircraft
deployed on a short-term basis, as well as an increase in ad hoc ACMI
flights. All-in charter revenues were $33MM compared to $27MM in Q2/23
and versus our estimate of $28MM. The Y/Y increase was due primarily to
the scheduled charter services between China and Canada, which started
during the current quarter, as well as an increase in ad hoc charters. We also
see positive momentum as we look out into H2/24 and into 2025. There is
clear upside to the Chinese e-commerce opportunities, strong Amazon
volume trends (i.e., Prime Big Deals Day Event), and an increase in ACMI
flights. Coming out of Q2/24 earnings season, CJT stands out amongst the
freight names we cover.
CJT Outperforming The Air Cargo Industry: We also see CJT
outperforming industry air cargo trends by looking at the air freight flight
hours we track. According to Radarbox, CJT has flown 3,097 flights from July
through to August 13, 2024. This is up 4% Y/Y. Looking at YTD through to
August 13, 2024, CJT saw 16,115 flights and this is up 2% Y/Y. For
reference, looking at the other bellwethers of the space, FDX’s YTD flight
activity was down 4% Y/Y; UPS flight activity was down 8% Y/Y; and DHL
flight activity was down 6% Y/Y. CJT’s flight hours relative to the other
dedicated air freight companies reinforce our view that the company’s
earnings have turned the corner. This speaks to its unique operating model,
best-in-class service, and market share position.