Earnings
Cargojet Announces First Quarter Financial Results
Cargojet Q1 Earnings Plunge 91% as Margin Compression Offsets Asset Sale Cash Flow
Executive Summary
- Cargojet reported Q1 2026 total revenues of $254.7 million, a modest 1.9% increase year-over-year (YoY).
- Net earnings collapsed to $4.1 million from $48.0 million in Q1 2025, representing a decline of approximately 91%.
- Adjusted EBITDA remained stable at $81.9 million, up slightly 1.4% YoY, with margins holding steady at 32.2%.
- Free cash flow swung to an inflow of $87.4 million from an outflow of $45.9 million in the prior year period.
- The FCF improvement was primarily driven by proceeds from asset disposals and related notes receivable totaling $128.2 million, rather than operational cash generation.
- Gross margins deteriorated significantly to 15.9% from 21.1% in Q1 2025.
- SG&A expenses surged 51.5% YoY to $24.7 million, attributed largely to higher share-based compensation.
- Net finance costs and other gains/losses increased by $21.9 million compared to the prior year.
- Operating fleet decreased from 41 aircraft in Q1 2025 to 40 aircraft in Q1 2026.
- Block hours declined 2.0% YoY to 16,994 hours.
Material Impact
- The headline net earnings miss is severe ($4.1M vs $48.0M), but the trend of declining profitability was signaled in Q4 2025 where net earnings dropped 62.6% due to finance costs. This confirms a deteriorating earnings trajectory rather than a surprise shock, supporting a Routine classification.
- Gross margin compression (down 520 basis points) indicates operational inefficiencies or pricing pressure that EBITDA stability masks. This is a negative fundamental signal for long-term valuation.
- The Free Cash Flow turnaround is positive on the surface ($87M inflow), but reliance on asset disposals ($128M proceeds) suggests core operating cash flow may not be sufficient to sustain this level without further divestitures.
- SG&A spike (+51.5%) due to share-based compensation increases dilution risk and reduces net income quality.
- Fleet reduction (41 to 40 aircraft) aligns with the strategic exit from non-core investments (21 Air in April 2026), but indicates a contraction in capacity which could limit revenue growth if demand rebounds.
- Overall, the news confirms the negative earnings trend established in Q4 2025 while highlighting margin risks that were less visible previously.
CJT · Price
Company Overview
- Cargojet Inc. is a Canadian air cargo logistics company providing time-sensitive transportation services.
- Flagship operations include its domestic overnight network in Canada, ACMI (Aircraft, Crew, Maintenance, Insurance) leasing, and charter services.
- The company recently expanded into Europe with a weekly service to Liege Airport (LGG) launched November 2025.
- Strategic focus has shifted toward core domestic and transatlantic operations following the exit from the 21 Air investment in April 2026.
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May 26, 2026 · 10:01