Are Air Canada (TSX:AC) and Wajax Corporation (TSX:WJX) on your watchlist, if not the buy list? Canada’s flag carrier and leading industrial products provider are hot stocks in 2023, and their market-beating returns could be so much more in two years.
As of this writing, the airline stock enjoys a 21.6% year-to-date gain ($23.57 per share). Market analysts are bullish that Air Canada can redeem lost glory and fly high again. Wajax trades at $28.29 per share, is up 47.4% thus far in 2023, and pays an attractive 4.67% dividend.
Rising higher
Air Canada was a promising high-growth stock at year-end 2019, owing to 27 consecutive quarters of profitability. Unfortunately, the global pandemic clipped its wings, grounded the entire fleet, and started a losing streak.
The $8.4 billion airline company is turning the corner due to strong travel demand and solid passenger bookings. In the first half of 2023, operating revenues and free cash flow (FCF) climbed 57.7% and 276% year over year to $10.3 billion and $1.95 billion, respectively.
Notably, net income reached $842 million compared to a $1.4 billion net loss from a year ago. In Q2 2023, net income was $838 million compared to the $386 million net loss in Q2 2022. However, the cargo business reported lower-than-expected financial results due to lower demand.
The significant growth in passenger revenues is an encouraging sign for Air Canada. Its President and CEO, Michael Rousseau, cites the superb performance of the international markets, where passenger revenues increased 70% year over year.
Overall, passenger revenues increased 42% versus Q2 2022. Also, the system load factor jumped 88% year over year as traffic growth outpaced capacity growth. For the full-year 2023, management expects average seat mile (ASM) capacity to increase by 21% versus 2022.
According to the International Air Transport Association (IATA), industry-wide revenue should recover nearly 96% of the pre-COVID level this year. Air Canada is restoring and rebuilding its solid foundation and simultaneously evolving the business for the future.
Management’s business imperative strategy is to “Rise Higher” and elevate everything about its business. If successful, it should propel Air Canada stock higher.
Solid fundamentals
Wajax supports industries in general and, in turn, the Canadian economy. This $608 million solutions expert provides a broad range of industrial products and services to various industries and core sectors. The strong performance in all business segments reflects in the stock’s outperformance.
In the first half of 2023, total revenue and net earnings increased 15.9% and 23% year over year to $1.1 billion and $46.5 million, respectively. Management notes the solid fundamentals in most markets, notably construction, energy, and mining. Wajax should also do better in the second half of 2023 due to the robust backlog ($551.2 million).
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Wajax’s President and CEO, Iggy Domagalski, said, “Top-line growth was supported by sustained customer demand across all regions. Solid year-over-year growth in equipment and product support sales was complemented by even greater strength in industrial parts and engineered repair services revenue.”
The recent acquisition of a specialized provider of custom electrical and instrumentation equipment will enable Wajax to undertake large-scale time-critical integration projects.
Good buys
Wajax is a better buy than Air Canada because of its solid fundamentals. However, the airline stock could be equally hot by 2025.
