Cargojet Inc. (CJT-T) shares on Monday fell 5.5%, despite reporting quarterly earnings that beat expectations. Analysts this morning are generally holding firm on their price targets and ratings, while trying to explain why investors were cool to the results.
Cargojet’s revenue in the third quarter rose 16.8% to $189.5-million, ahead of the Street consensus of $178-million. Adjusted EBITDA of $70.9-million, up 1.6% from a year ago, beat the consensus forecast of $68.8-million.
But the company outlined some challenges to the business in its conference call with analysts.
“Belly capacity in passenger aircraft is expected to constrained for the foreseeable future due to structural changes in the market,” noted Acumen Research’s Nick Corcoran. But, “these structural changes are positive for the long-term demand for air cargo and supportive of CJT’s domestic and international growth plan.”
Meanwhile, labour costs for pilots continue to see upward pressure from pilot fatigue rules and a tight labour market. But these costs were already well telegraphed to the market, Mr. Corcoran pointed out. CJT has also seen pricing pressure for ground handling staff and moved to expand the team and facilities to handle additional growth going forward.
Mr. Corcoran maintained a “buy” rating and C$300 target price. “We believe the strong Q3/21 results were overshadowed by concerns about rising costs related to pilots, ground handling, additional leadership, and other expenses. The company is well positioned to deliver another record fourth quarter with aircraft deliveries through the end of 2024 expected to fuel both domestic and international growth.”
CIBC’s Kevin Chiang, who has an “outperformer” rating and C$245.00 price target on the stock, had a similar reaction. “Our positive thesis on CJT is unchanged. It has a strong revenue pipeline. While it sees some expense pressure, we see a path towards margin expansion looking out over our forecast period,” he said.
Elsewhere, RBC cut its target price modestly to C$295 from C$300.