Today may be the day when the S&P/TSX composite index closes at a record high. The Index is just 14 points away from achieving this milestone.
There are no Canadian economic releases today. In the U.S., it is a busy day with data such as weekly jobless claims and continuing claims reported, along with December new home sales data, and January Services Purchasing Managers Index data announced.
There are three companies in the S&P/TSX composite index scheduled to report fourth-quarter financial results today, Potash Corp. of Saskatchewan (POT-T), Rogers Communications (RCI.B-T) and Celestica (CLS-T).
In major commodity price moves this morning, the price of gold is under some pressure after breaking below the $1,200 (U.S.) level on Wednesday. The prices of oil and copper are relatively stable, while the price of natural gas is soaring, up over 2 per cent.
Briefly recapping Wednesday's performance, all major North American equity markets closed with gains.
In the U.S., the Dow Jones Industrial Average crossed above the 20,000 level for the first time in its history, rising 0.78 per cent. The S&P 500 index and Nasdaq composite index also closed at record highs, advancing 0.80 per cent and 0.99 per cent, respectively.
Turning to Canada, the S&P/TSX composite index advanced 33 points, or 0.21 per cent. There were 164 securities in the TSX Index that advanced, 80 securities declined in value, and five stocks closed the day unchanged.
Month-to-date, the TSX Index is up 2.33 per cent.
On today's TSX Breakouts report, there are 62 stocks on the positive breakouts list (stocks with positive price momentum), and just three securities on the negative breakouts list (stocks with negative price momentum).
The security highlighted today may appear on the positive breakouts list sometime in 2017 – Cargojet Inc. (CJT-T). It is a stock with a history of rallying sharply after reporting its quarterly results. According to Bloomberg, for the past five quarters, the day the company released its quarterly results, the share price rallied between 2.7 per cent and 7.8 per cent. The fourth quarter is generally the company's strongest quarter given the higher volume of shipments occurring over the holiday season. The company will be reporting its seasonally strong fourth-quarter results before the market opens on Thursday, March 9.
A brief outline is provided below that may serve as a springboard for further fundamental research.
The Company
Mississauga-based Cargojet provides time sensitive air cargo services. The majority of the company's revenues are generated by providing overnight air cargo services between 14 major Canadian cities. The company provides all air cargo services for Canada Post and Purolator across Canada, as well as providing cargo services for United Parcel Service Canada (UPS). Last year, the company began cargo flights to Mexico, Colombia, and Peru under a contract with Air Canada, and also began service to Frankfurt, Germany. The company passes higher fuel costs on to its customers and will similarly pass along any cost savings.
The company has a history of rallying after reporting its quarterly results. According to Bloomberg, for the past five quarters, the day the company released its quarterly results, the share price rallied 2.7 per cent, 3.1 per cent, 4.1 per cent, 5.9 per cent and 7.8 per cent.
The fourth quarter is generally the company's strongest quarter given the higher volume of shipments occurring over the holiday season. On Dec. 5, Ajay Virmani, the chief executive officer, stated in a news release that, "The tremendous growth of on-line shopping by Canadians is definitely contributing to increased demand for Cargojet's time sensitive overnight air cargo services by all of our customers. All of our major customers have given us extremely heavy and challenging Peak demands and forecasts. Cargojet's overnight network is able to expand capacity as demand increases and we are fully prepared to meet our customer's peak shipping season requirements to ensure all shipments are flown to various destinations to meet holiday deliveries." The Street is expecting the company to report EBITDA of $27.6-million in the fourth quarter.
On Nov. 7, the company reported better-than-expected third-quarter results. The company reported adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) of $25.3-million, up 120 per cent from the same period last year and beating the Street's expectation of $22.3-million. The stock price rose 2.7 per cent that trading day.
Dividend policy
The company pays shareholders a quarterly dividend of 17.5 cents per share or 70 cents on a yearly basis. This equates to an annualized dividend yield of 1.4 per cent.
In August 2016, the company announced a 17 per cent increase to its quarterly dividend, lifting it to its current level.
Valuation
According to Bloomberg, the stock is trading at an enterprise value-to-EBITDA (EV/EBITDA) multiple of 7.9 times the 2018 consensus estimate. Over the past two years, the stock has traded at a forward EV/EBITDA multiple largely between 7 times and 9 times.
Analysts have target prices that range from a low of $51 to a high of $59. Individual target prices supplied by five firms are as follows in numerical order: $51, $54, $55, and two at $59. The average one-year target price is $55.60, suggesting the shares may realized a potential price return of 11 per cent over the next 12 months.
Analysts' recommendations
According to Bloomberg, six analysts cover this small-cap industrial stock, five analysts have 'buy' recommendations and one analyst (from EVA Dimensions) has a 'underweight' recommendation.
The six firms providing research coverage on the company are as follows in alphabetical order: Acumen Capital, Beacon Securities, CIBC World Markets, EVA Dimensions, National Bank Financial, and RBC Capital Markets.
Analysts' revisions
Earlier this month, Kevin Chiang, the analyst from CIBC World Markets, increased his target price to $59 from $51 and maintained his 'outperform' recommendation. In December, Brian Pow, the analyst from Acumen Capital, tweaked his target price higher to $55 from $53 while maintaining his 'buy' recommendation on the stock.
Financial forecasts
Earnings are forecast to continue its upward trajectory. The consensus EBITDA estimates are $92-million for 2016, $103-million for 2017, and $111-million in 2018. The consensus EPS estimate is $1.11 in 2016, $2.31 in 2017, and $2.80 for 2018.
Notable insider transaction activities
In December, Jamie Porteous, who sits on the Board of Directors and is the company's chief commercial officer, sold 68,100 shares over a number of days.
Chart Watch
Year to date, the share price has rallied an impressive 9.5 per cent.
On Wednesday, the stock price soared 6 per cent on high volume. Over 114,000 shares traded, above the two-month historical daily average trading volume of approximately 40,000 shares.
In terms of key resistance and support levels, the share price is approaching initial overhead resistance around $51.50. Meanwhile, there is initial downside support around $45.
The relative strength index is at 67, suggesting the shares are approaching overbought territory. Generally, a reading at or above 70 indicates an overbought condition.
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The Breakouts file is a technical analysis screen intended to identify companies that are technically breaking out. In addition, this report highlights a company's dividend policy, analysts' recommendations, and provides a brief technical analysis for a security to provide readers with more information.
If a stock appears on the positive breakouts list, this indicates positive price momentum, and that a company may be worthwhile for investors to look at the fundamentals in order to determine if the recent price strength is warranted and will continue. If a security appears on the negative breakouts list, this indicates negative price momentum, and may be indicative of either deteriorating fundamentals or perhaps indicates a buying opportunity.
Securities screened are from the S&P/TSX composite index, the S&P/TSX Small Cap index, as well as Canadian small cap stocks outside of these indexes that have a minimum market capitalization of $200-million.
A technical analysis screen does not replace fundamental analysis, but can help identify companies worth having a closer look at.