Cargojet shares hit record high on work-from-home activity during COVID lockdown

Cargojet Inc. shares surged to a record high Thursday after it reported second-quarter revenues soared 65 per cent amid heightened e-commerce driven by work-from-home activity during the COVID-19 lockdowns.

Its shares gained nearly 16 per cent to close up $26 at $192.38 on the Toronto Stock Exchange. Earlier, they hit an intraday high of $194.70, a record for Cargojet.

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Revenues soared to $196.1 million in the quarter ended June 30 from $119.1 million a year earlier.

Adjusted EBITDA, a measure of earnings, more than doubled to $91.1 million from $37.5 million due to the higher revenue.

The Mississauga, Ont.-based company, which provides time sensitive overnight air cargo services, was among the main beneficiaries of explosive e-commerce sales that grew 120 per cent year over year in May.

In April, e-commerce sales doubled as a percentage of total retail sales to 14 per cent compared with the preceding three months.

The ongoing dearth of passenger planes in the sky, which typically carry cargo in their bellies, also bolstered demand — and airfreight charges — for cargo services amid travel restrictions and tight borders.

"Reduced global air cargo capacity as a result of extremely reduced passenger flights led to strong...growth in international markets that we believe will continue for the short and medium term," said Cargojet CEO Ajay Virmani.

Shuttling personal protective equipment and other medical supplies to Canada from Asia injected even more cash into the 18-year-old company though "that may not be recurring," he said.

Analyst Mona Nazir of Laurentian Bank Securities said she was "positively surprised" by the "bumper growth," which was fuelled partly by charters for medical goods from Ottawa.

"Although Q2 results are unlikely to be replicated in future quarters, demand for charter services and e-commerce remains above the pre-COVID levels, and is likely to persist for some time," she said in a research note.

Canaccord Genuity analyst Doug Taylor stressed Cargojet's "blockbuster" quarter and sturdy shares.

"We don't see anything here to knock the stock off its lofty valuation in the near-term," Taylor said in a research note.

Cargojet was expected to earn $6.5 million or 49 cents per share of net income on $127.6 million of revenues, according to financial markets data firm Refinitiv.

However, it actually reported a net loss of $45.1 million or $2.89 per share, compared with net earnings of 32 cents per share or $4.3 million a year earlier. The biggest reason for the miss was a $84.7 million loss on the fair value of stock warrants, which is excluded from EBITDA.

This report by The Canadian Press was first published Aug. 6, 2020.

Companies in this story: (TSX:CJT)

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