The shipping industry plays a crucial role in transporting goods and raw materials around the globe. Some 80% of goods globally are transported by ships. And it is telling that several industries were negatively affected recently when the Ever-Given, one of the world’s largest container ships, got stuck in the Suez Canal.
The recent closure of the Ningbo-Zhoushan port in China also highlighted the importance of the shipping industry. The Baltic Dry Index (BDI) recently declined from a more than 11-year high but recorded its second monthly gain in August due to global shipping constraints and robust demand. Because the need to transport goods is expected to remain high in the coming months, the shipping industry should achieve decent growth.
Therefore, we think it could be wise to scoop up the shares of fundamentally sound shipping stocks Costamare Inc. (CMRE) and Safe Bulkers, Inc. (SB). However, since the prices of shares of Golden Ocean Group Limited (GOGL) and Castor Maritime Inc. (CTRM) have far exceeded their intrinsic values, they are best avoided now.
Stocks to Buy:
Costamare Inc. (CMRE)
Based in Monaco, CMRE is an international owner of containerships and charters its vessels to various liner companies. Its fleet of ships includes Cosco Guangzhou, Titan, Valiant, and Maersk Kobe.
On June 14, CMRE acquired 16 dry bulk vessels of between 33,000 – 85,000 DWT. Gregory Zikos, the company’s CFO, said, “We are pleased to announce the acquisition of dry bulk vessels. We have decided to invest in a liquid sector with strong fundamentals that provide enhanced return opportunities for our shareholders.”
CMRE’s voyage revenue increased 49.1% year-over-year to $166.77 million in the second quarter, ended June 30, 2021. Its net cash generated through operating activities came in at $104 million, up 45.5% year-over-year. Its adjusted net income for the quarter was $58.28 million, up 83.8% year-over-year. Also, its adjusted EPS was $0.47, representing an 80.8% year-over-year rise.
In terms of trailing-12-month non-GAAP P/E, CMRE’s 11.80x is 45.6% lower than the 21.71 industry average. In addition, the stock’s trailing-12-month EV/EBITDA is 11.46x, which is also lower than the 14.40x industry average.
Analysts expect CMRE’s revenue and EPS to increase 37.6% and 44.6%, respectively, year-over-year to $1.04 billion and $3.24 in its fiscal year 2022. In addition, it has surpassed the consensus EPS estimates in each of the trailing four quarters. Over the past nine months, the stock has gained 108.6% in price to close yesterday’s trading session at $14.98.
CMRE’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, which indicates a Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
CMRE has a B grade for Growth, Momentum, and Sentiment. Within the Shipping industry, it is ranked #8 of 47 stocks. Click here to see the additional POWR Ratings for Value, Stability, and Quality for CMRE.
Safe Bulkers, Inc. (SB)
SB, which is also based in Monaco, owns and operates dry bulk vessels for transporting bulk cargoes, primarily coal, grain, and iron ore. Its Post-Panamax vessels include Marina, Xenia, Sophia, Eleni, and Martine, while its fleet of Capesize vessels includes Kanaris, Pelopidas, and Lake Despina.
SB announced on August 2, 2021, that it has entered a 12-month bareboat charter agreement with a Capesize class dry-bulk vessel purchase option. Dr. Loukas Barmparis, the company’s President, said, “Selective second-hand acquisitions and newbuild orders are within the context of our fleet renewal strategy.”
For the fiscal second quarter, ended June 30, 2021, SB’s net revenue increased 69% year-over-year to $81.58 million. Its net income was $32.45 million, versus a $13.88 million loss in the year-ago period. Also, its EPS came in at $0.27, versus a $0.16 loss per share in the prior year’s quarter. Its adjusted EBITDA amounted to $54.05 million, up 763.2% year-over-year.
In terms of trailing-12-month EV/EBITDA, SB’s 5.79x is 59.8% lower than the 14.40x industry average. Also, its 9.22x trailing-12-month EV/EBIT is 53.7% lower than the 19.92x industry average.
SB’s revenue is expected to be $321.18 million in its fiscal year 2021, representing a 62.1% year-over-year rise. The company’s EPS is expected to increase 600% year-over-year to $1.20 in the current year. In addition, it surpassed the Street’s EPS estimates in each of the trailing four quarters. Over the past nine months, the stock has gained 249.1% in price to close yesterday’s trading session at $4.05.
It’s no surprise that SB has an overall B rating, which equates to a Buy in our proprietary rating system. In addition, it has an A grade for Growth, and a B grade for Value, Momentum, Sentiment, and Quality.
Stocks to Avoid:
Golden Ocean Group Limited (GOGL)
Based in Hamilton, Bermuda, GOGL owns and operates a fleet of dry bulk carrier vessels, focusing on the Capesize, Panamax, and Supramax markets. The company’s vessels help transport a range of major and minor bulk commodities, including ores, coal, grains, and fertilizers.
On August 10, 2021, GOGL announced the termination of its relationship with Capesize Chartering Ltd. (CCL), a joint venture to coordinate the Capesize spot chartering services of GOGL, Starbulk, CTM, and Bocima. This could harm the company’s business.
GOGL’s total operating revenue for the second quarter (ended June 30, 2021) came in at $275.70 million, up 137.2% year-over-year. However, its total liabilities have increased 33.5% sequentially to $1.68. Also, its operating expenses have increased 34.5% year-over-year to $181.24 million.
In terms of trailing-12-month EV/S, GOGL’s 4.59x is 122.8% higher than the 2.06x industry average. Furthermore, its 2.42x trailing-12-month P/S is also 44.9% higher than the 1.67x industry average.
GOGL’s revenue is expected to be $805.65 million in its fiscal year 2022, representing a 1.1% year-over-year decrease. Also, the company’s EPS is expected to decrease 5.3% year-over-year to $1.62 in the next year. The stock has lost 3.1% in price since hitting its 52-week high of $12.17 on August 30, 2021, to close yesterday’s trading session at $11.73.
GOGL’s POWR Ratings reflect its poor prospects. The stock has a D grade for Quality. Click here to access the additional POWR Ratings for GOGL (Momentum, Growth, Sentiment, Stability, and Value). Again, GOGL is ranked #30 in the Shipping industry.
Castor Maritime Inc. (CTRM)
CTRM, which is based in Limassol, Cyprus, is engaged in the ocean transportation of dry bulk cargoes worldwide. The company provides seaborne transportation services for dry bulk cargo, including iron ore, steel products, sugar, and scrap metals.
CTRM marginally regained compliance with the Nasdaq market’s regulations on June 15, 2021. It was confirmed by the Nasdaq Stock market that the company is in full compliance with Nasdaq Listing Rule 5550(a)(2) concerning the minimum bid price of its shares.
For the second quarter, ended June 30, 2021, CTRM’s revenue increased 742.7% year-over-year to $21.79 million. However, its fleet utilization was 97% in the quarter, compared to 100% in the year-ago period. Its daily vessel operating expenses increased 21.1% year-over-year to $5,390. In addition, its total liabilities came in at $57.03 million, versus $21.99 million for the period ended December 31, 2020.
In terms of trailing-12-month EV/Sales, CTRM’s 6.11x is 196.6% higher than the 2.06x industry average. Also, its trailing-12-month P/S of 2.82x is 68.9% higher than the 1.67x industry average Over the past six months, the stock has lost 74.7% in price to close yesterday’s trading session at $2.35.
CTRM’s POWR Ratings are consistent with this bleak outlook. The stock has an overall D rating, which equates to a Sell in our proprietary rating system.
In addition, the stock has an F grade for Stability, and a D grade for Value, Sentiment, and Quality. We have also graded CTRM for Growth and Momentum. Click here to access all the CTRM ratings. CTRM is ranked #37 in the Shipping industry.
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CMRE shares were trading at $15.03 per share on Friday morning, up $0.05 (+0.33%). Year-to-date, CMRE has gained 87.46%, versus a 21.93% rise in the benchmark S&P 500 index during the same period.
About the Author: Manisha Chatterjee
Since she was young, Manisha has had a strong interest in the stock market. She majored in Economics in college and has a passion for writing, which has led to her career as a research analyst. More...
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