Cargojet Inc.
(CJT-T) C$115.89
Cargojet Provides 2026 Financial Targets Ahead of Investor Day Event
This morning, Cargojet provided new long-term 2026 financial targets and a brief update on Q3/22. The company is hosting an investor day today at 10 a.m.
Impact: POSITIVE
We view Cargojet's new 2026 financial target's positively. While we acknowledge that short-term market concerns including the direction of the global economy, consumer spending, e-commerce trends, and air cargo volume and pricing will continue to influence the short-term share price direction, our preliminary analysis of the 2026 financial targets suggest attractive long-term share price upside based on a range of potential EBITDA valuation multiples. In addition, indications that Q3/22 results are in-line with management expectations and are demonstrating 'stable' volume should be reassuring to the equity market when considering the concern reflected by recent share price weakness.
We view the implied adjusted EBITDA margin profile positively, implying an upward bias to our long-term assumptions. The indication that Q3 volume remains stable is encouraging when considering recent industry data which points to what we believe should be an expected slowdown, and recent indications from FedEx which reported a slowdown in volume through the second-half of August and into September.
Revenue: Cargojet targets 2026 revenue of $1.3-1.4 billion (vs. 2021 of $758 million), implying a CAGR of approximately 11-13%.
Adjusted EBITDA: Cargojet targets 2026 adjusted EBITDA of $500-550 million (vs. 2021 of $293 million), implying a margin of 38-39% and a CAGR of approximately 11-13%.
Adjusted Free Cash Flow: Cargojet targets 2026 adjusted FCF of $320-360 million (vs. 2021 adjusted FCF of $160 million), implying a CAGR of approximately 15-18%.
Net debt to Adjusted EBITDA between 1.5-2.5x vs. 2021 of 1.03x.
Fleet: Management is planning a fleet size of 40 aircraft by the end of 2022 (in-line with TD's current forecast) and to expand the fleet to 51 aircraft over the next 4-5 years (in-line with TD's current forecast).
Growth Capex: Management expects to invest approximately $1.2 billion in growth capital expenditures.
Currency Exchange Rate: Management assumes that the Canadian dollar will average $1.30 per U.S. dollar from 2023 through 2026, above our assumption of approximately $1.25-1.26 per U.S. dollar.