Cargojet (TSX:CJT), Canada's leader in overnight air cargo services, has had an eventful year. Its stock has also been a topic of interest for both long-term investors and analysts. As of writing, Cargojet stock sits far off its 52-week high of $144.97. For investors, this performance may signal either a buying opportunity or cause for caution, depending on one's outlook for the broader e-commerce and logistics markets. Cargojet stock remains deeply tied to the health of online retail and supply chain trends, both of which have seen fluctuations this year.

Recent performance

Cargojet stock's third-quarter earnings were a bright spot for the company amid an otherwise mixed year. The company reported revenues of $245.6 million, up a healthy 14.8% from $214 million in the same quarter last year. This was driven largely by strong demand in its core domestic overnight network as well as its ACMI (aircraft, crew, maintenance, and insurance) and charter services.

Adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) came in at $82.2 million, a significant improvement over $70 million in the third quarter (Q3) of 2023. Net earnings also saw a dramatic leap, rising to $29.7 million from just $10.5 million the year before. Such growth suggests Cargojet has managed to control costs and improve operational efficiency despite some macroeconomic headwinds impacting the logistics sector globally.

Still down

Earlier in the year, however, Cargojet stock experienced some turbulence. Second-quarter results showed total revenues of $230.8 million, up from $209.7 million the previous year. Yet the company also reported a net loss of $25 million. This stark contrast to the $31 million profit in Q2 2023 caught some investors off guard. Thus raising concerns about rising costs and the competitive landscape in logistics.

Adjusted EBITDA, while still solid at $79.1 million, didn't fully alleviate worries about margin pressure. It's clear that while revenue growth has been steady, managing expenses remains a key challenge for the company, particularly in fuel, labour, and fleet maintenance.

When looking at Cargojet stock's price performance, it's been a mixed bag. The stock has struggled to break through its 200-day moving average, which currently hovers around $124. For technical investors, dipping below this indicator can signal bearish sentiment in the short term. Over the past year, the stock has fallen roughly 7% at writing. This decline has been exacerbated by market concerns surrounding inflation and a softer economic outlook — all of which have impacted logistics stocks globally.

Looking ahead

The outlook for Cargojet stock over the next year depends heavily on both company execution and broader market conditions. For the stock to rebound meaningfully, Cargojet stock will need to demonstrate improved profitability, particularly in its margins, while maintaining revenue growth. The company's forward price-to-earnings (P/E) ratio of approximately 18.15 suggests that it's trading at a reasonable valuation relative to its future earnings potential — provided it can execute its cost-management strategies.

One positive for investors is Cargojet stock's commitment to shareholder returns through dividends. The company currently offers an annualized dividend of $1.40 per share. While this may seem modest compared to higher-yielding dividend stocks, it represents a significant increase compared to Cargojet's historical averages. That said, with a payout ratio of over 539%, there are lingering questions about the sustainability of this dividend if profitability does not stabilize. Investors seeking income should carefully weigh this factor alongside the stock's growth potential.

Bottom line

Cargojet stock's recent performance has been a mix of encouraging growth in revenue and earnings but tempered by rising costs and uncertain market conditions. While its stock price has struggled this year, the company's strategic initiatives to diversify its operations, expand capacity, and solidify key partnerships position it well for future growth. Over the next 12 months, investors will be watching closely for signs of improved profitability and margin expansion. If Cargojet stock can deliver on these fronts while maintaining its revenue momentum, the stock could see a solid rebound, potentially approaching analyst targets closer to $150 or beyond. For now, cautious optimism seems to be the name of the game.