Shares of Cargojet Inc. (CJT-T) reached new heights on Tuesday after the overnight air cargo company reported earnings that beat expectations amid soaring growth in e-commerce sales and lofty expectations heading into the holiday shopping season.
The stock hit a record $243.36 in Tuesday trading, up 8.4 per cent from its Monday close of $224.40. The stock has been steadily rising in recent weeks and is up more than 20 per cent in the past month and has risen by about 138 per cent over the past year.
“Those looking for another strong beat from Cargojet were not disappointed this morning,” Canaccord Genuity analyst Doug Taylor wrote in a note. Mr. Taylor, who has a “hold” and $240 target on the stock, said the company continues to benefit from “an unprecedented decline in competitive belly capacity leading to huge gains in charter at ACMI [ Aircraft, Crew, Maintenance and Insurance] revenue.”
The Mississauga-based company reported third-quarter revenue of $162.3-million, an increase from $117.4-million during the same period year ago and ahead of analyst consensus expectations of $153.4-million. Adjusted EBITDA rose to $78.1-million from $39.1-million and also surpassing expectations of $62.1-million.
“There is no doubt that Cargojet’s domestic overnight network continues to benefit from the elevated levels of e-commerce, but we are equally focused on ensuring that we are building strong long-term growth in our ACMI and charter businesses,” stated Cargojet chief executive officer Ajay Virmani in a release.
The company reported a net loss of $20.4-million or $1.31 per share versus a profit of $11.8-million or 87 cents a year ago. Analysts said the difference was due to the fair value adjustment on a stock warrant agreement with Amazon announced in August 2019.
Some analysts covering the stock had raised their estimates and target price ahead of the results released this morning.
ATB Capital Market analyst Chris Murray, who has a “sector outperform” and $220 price target on the stock, said in an email to the Globe that the company is “very well-positioned for several years of growth and what we anticipate are growing cash flows as they increase the utilization of their existing fleet.”
In a note, he said the company’s results were well ahead of consensus “with strong growth in all lines of business exceeding what already were big expectations for the quarter,” adding that the fourth-quarter is expected to be a record.
“Our thesis of expanding volumes (and pricing) being driven by increasing e-commerce demand leading to free cash flow expansion as the Company utilizes more of its already built network continues to play out,” Mr. Murray wrote.
Beacon Securities analyst Ahmad Shaath increased his target price to $325 from $310 on Tuesday, following the earnings release, and maintained a “buy” rating.
“The tailwinds from COVID19 pandemic to CJT’s business continue to surprise us (and the street) to the upside,” Mr. Shaath said in a note titled As we said before, you must own it. (CJT refers to the company’s stock ticker).
He also said changes in the retail space “show no signs of abating and the struggles of passenger airlines are starting to show signs of structural change in international trade flows, both benefiting CJT.”
He said Cargojet’s balance sheet “has improved markedly” and the company “sits in an enviable position to access capital as needed to fund any growth initiatives, which are plenty in our view.”
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