Why Cargojet Stock Is Surging Past 52-Week Highs

Cargojet (TSX:CJT) stock surged by 17% after a new deal was announced, with upgrades coming in as well for the company from analysts.

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Cargojet (TSX:CJT) has been climbing higher, and if you’ve been investing in Cargojet stock for some time (like myself), you’re probably thinking, “It’s about time!” Canada’s largest overnight cargo airline saw shares surpass $200 per share back during the pandemic when there was high e-commerce demand. But that quickly fell back when the market dropped.

Yet now, Cargojet stock is back. Shares have risen 17% in the last week alone! So, let’s look at what’s going on with Cargojet stock.

What happened?

The main catalyst that sent shares rising was a new deal for Cargojet stock. Cargojet signed a three-year deal with Great Vision HK Express to provide scheduled charter flights between Hangzhou, China, and Vancouver, Canada. This agreement, utilizing B767-300F aircraft, enhances Cargojet’s international presence and is expected to drive significant revenue growth

Following the announcement of the China contract, Scotiabank increased its price target for Cargojet shares from $145 to $160. This bullish outlook reflects confidence in Cargojet stock’s ability to capitalize on new business opportunities and strengthen its market position.

The reason for such confidence? This deal opens up new routes for Cargojet, allowing it to tap into the burgeoning demand for air cargo services between North America and Asia. The China-Canada corridor is particularly significant due to the high volume of goods traded between these two regions. What’s more, by expanding its services to Asia, Cargojet diversifies its market base, reducing dependence on existing routes and customers and mitigating risks associated with market fluctuations in specific regions.

On top of earnings

The growth in share price comes after an already positive earnings report from Cargojet stock. Cargojet reported a first-quarter profit of $32.5 million, up from $30.5 million the previous year. This consistent financial performance underscores the company’s operational efficiency and growth potential.

What’s more, Cargojet stock reported total revenue of $876.8 million for the first quarter of 2024, which marks a significant year-over-year increase. This growth is attributed to both domestic and international service expansions. Add to this the company achieved a net profit of $32.5 million, up from $30.5 million in the same period last year. Cargojet’s earnings per share (EPS) for the quarter was $2.34, showing solid profitability.

Finally, Cargojet stock declared a quarterly dividend of $0.315 per common share, which reflects its commitment to returning value to shareholders. The dividend yield stands at approximately 0.99%, indicating a steady return for investors.

Bottom line

So, shares have risen to 52-week highs. What’s more, they continue to climb. Should investors then wait for a dip? In my view, the dip is already there. Cargojet stock’s all-time high was back in 2022 when shares hit $240 per share. As of writing, shares are now at $130 per share. Therefore, there is still a potential upside of 85% to reach those levels!

And those levels look closer than ever. With a new deal, increased earnings, and more consumer confidence, conditions look perfect for Cargojet stock to rise even higher.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Amy Legate-Wolfe has positions in Cargojet. The Motley Fool has positions in and recommends Cargojet. The Motley Fool recommends Bank Of Nova Scotia. The Motley Fool has a disclosure policy.

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