TSX:CJT - Post Discussion
Post by
retiredcf on Nov 02, 2022 3:26pm
RBC Report
Their upside scenario target remains $334.00. GLTA
October 31, 2022
Cargojet Inc.
Q3 in-line; preliminary topline guide into 2023 above consensus
Our view: 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.
Key points:
Q3 broadly inline. CJT reported solid revenue at $233MM (cons $245MM) - up 23% y/y on the back of continued volume growth, new ACMI revenue and steady pricing. While revenue was slightly below relative to expectations, we point out that it was on charter and pass through revenue, which is of lower value. Adj. EBITDA came in at $82MM, in-line with our $83MM and slightly below consensus $85MM. Margins were better than expected, at 35.3%, nicely ahead of our 33.2%. Highlights from the release, conference call and our subsequent call back with mgmt. as follows:
• Management guides to 2023 growth above expectations. With tough comps in Q4/22 and into 2023, we had been calling for a decline in Domestic revenue in Q4. However, mgmt indicated that, based on customer purchasing of Q4 peak capacity now confirmed, not only would there be growth on top of Q4/21's tough 18% growth comp, but that growth would be double-digit (we had been -10% in Q4 volume). Moreover, mgmt provided preliminary growth guidance for 2023 of "high single digits" which is above consensus expectations for a pronounced decline in Domestic revenue (given that consensus revenue for 2023 is 3% on a consolidated basis; and with ACMI +~30%, this implies prior consensus was calling for negative Domestic growth).
• Quality of ACMI coming in better than expected. A key flag on today's call is the high quality nature of CJT's ACMI revenue. DHL is utilizing CJT as a core component of their international capacity, with a new route (Halifax to Los Angeles) having much longer stage length than in prior contracts. Accordingly, we see the ACMI (in addition to being less volatile due to the contractual nature) as having higher quality due to longer stage lengths and multiple destinations involved.
Adjusting estimates for mild recession. As we have done for all transports in our coverage, we are now building in recessionary weakness into our forecasts for H1/23. As a result; our EBITDA estimates come down (and notably below guidance); however we highlight that ACMI is revised higher on the back of the higher (and higher quality) revenue noted above. Our target moves to $272 (from $274); representing a ~100% implied return. Reiterate CJT as our best idea in Transportation.
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