All well above where we currently sit. GLTA
While its third-quarter results modestly missed expectations, Canaccord Genuity analyst Matthew Lee continued to applaud Cargojet Inc.’s “defensive qualities,” emphasizing its “balance sheet flexibility, well managed capital spending, and stable growth trajectory in the medium term.”
Shares of the Mississauga-based company rose 2.2 per cent on Monday following the premarket earnings release, which included revenue of $232.7-million and EBITDA of $82.1-million. Both fell narrowly lower than the Street’s expectations ($244.6-million and $84.7-million, respectively).
“Our main takeaway was management’s commentary around its F23 domestic outlook and the improved clarity on Cargojet’s ability to defer or cancel aircraft if needed,” said Mr. Lee. “On the former, management noted its expectation for ‘high single-digit or low double-digit’ domestic growth in F23, which was far above our 2.5-per-cent estimate. On the latter, the firm has updated its deferred capex expectations, now forecasting the ability to cancel or defer upwards of $300-million in future aircraft acquisitions.
“We believe the two data points, in combination, should assuage some investors’ concerns about CJT’s ability to scale down in an economic recession while providing evidence that the firm’s competitive position may allow it to ride out the storm.”
After “modestly” reducing his charter assumptions but increasing his domestic revenue estimate based on “stronger-than-expected performance this quarter and management’s expectation of mid-single-digit plus growth in F23,” Mr. Lee raised his target for Cargojet shares to $200 from $195 with a “buy” rating. The average is $201.18.
“We believe that the company’s positioning as a dedicated freighter, combined with its increasingly valuable B2C contracts, growing fleet, and virtual monopoly in overnight shipping, justify our target and multiple.” he said.
Elsewhere, others making changes include:
* RBC’s Walter Spracklin to $272 from $274 with an “outperform” rating.
“CJT had an inline Q3; maintained their constructive outlook on Q4 peak; and pointed to top line growth that is above expectations. And while we have now factored in a recession into our H1/23, we point to contractual revenue (in ACMI) that should provide support even in a recessionary scenario. Reiterate CJT as our top name in transportation,” he said.
* Scotia Capital’s Konark Gupta to $185 from $180 with a “sector outperform” rating.
“CJT reported continued strong growth in Q3, although results slightly missed due to weaker-than-expected revenue in lower-quality streams,” said Mr. Gupta. “Management is not witnessing any signs of a major slowdown, based on customer feedback and demand for aircraft. It expects a controlled peak season in Q4 and better-than-expected growth in Domestic and ACMI segments in 2023. In addition, the company has now deferred one B777 delivery due in 2026 by one year to reduce the commercial risk, while noting that it has flexibility to defer or cancel up to $300-million capex (double the amount disclosed at the investor day). We have slightly trimmed our Q4 expectations to reflect the Q3 trends and uncertainty in the adhoc charter business.”
* Acumen Capital’s Nick Corcoran to $220 from $240 with a “buy” rating.
“Despite potential macro headwinds, CJT remains well positioned with an industry leading position in the domestic air cargo market, expanding relationships with international freight carriers that are expected to drive international revenue growth well into the future, and a strong balance sheet to execute on the fleet plan,” he said.