Cargojet (TSE:CJT) is one of those companies that few people hear about until something goes wrong with it. Despite its lack of attention, it’s still a vital part of Canada’s operations, particularly in terms of getting valuable supplies to the northern regions. And a renewed contract has given Cargojet’s investors a little more faith as well, pushing shares up around 2% in Wednesday afternoon’s trading session.
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Cargojet had a contract with Canadian North, an airline that puts most of its focus on the Arctic regions of Canada. Cargojet took a lot of Canadian North’s cargo runs, reports note, and that deal seems to be working out well for both sides. In fact, it’s working out so well that they’re keeping the deal going. Under the terms of the new agreement—which is, at last report, similar to the old—Cargojet will be the exclusive air cargo carrier to Iqaluit from both Winnipeg and Ottawa.
Meanwhile, Canadian North will handle shipments throughout the Arctic in general. It’s a deal designed to boost cargo capacity and get more goods up to the Arctic areas; Canadian North also noted that it’s doubling the size of its Ottawa cargo facility, a project that should be done by 2026.
Is Cargojet Ready for Prime Time?
The renewed deal makes it clear that Cargojet will be running a lot of cargo, but can it actually live up to the load? About six weeks ago, back in mid-November, Cargojet revealed that it was reducing its capital expenses by selling off its Boeing 757 freighters and pushing back its 767 conversion plans. These were considered “surplus” freighters, so there may still be sufficient capacity to handle a renewed contract. And certainly, selling off surplus hardware is a good move, as long as there’s still some slack in the schedule to account for unexpected breakdowns or the like.
Is Cargojet a Good Buy?
Turning to Wall Street, analysts have a Strong Buy consensus rating on Cargojet stock based on seven Buys and two Holds assigned in the past three months, as indicated by the graphic below. After a 1.57% rally in its share price over the past year, the average Cargojet price target of C$140.80 per share implies 21.3% upside potential.
