Danaos Corporation (DAC) is headquartered in Piraeus, Greece, and is a prominent container and dry bulk vessel service provider in Australia, Asia, and Europe. It provides seaborne transportation services by operating vessels in the shipping industry’s containership and dry bulk sectors.

Danaos operates through its expanding fleet of 73 container vessels ranging from 2,200 TEU to 13,100 TEU. It has 14 container vessels under construction and 10 Capesize dry bulk vessels. Furthermore, during the second quarter, Danaos received delivery of the first three new building containerships and added six new building containerships to its order book.

For the second quarter of 2024, DAC paid a dividend of $0.80 per share on August 29, 2024, to stockholders of record at the end of August 20, 2024. DAC’s annual dividend of $3.20 translates to a yield of 3.79% at the current share price level. The company’s four-year average dividend yield is 3.04%. Further, its dividend payouts have increased at a CAGR of 47.4% over the past three years.

The company’s strengthening container ship business, dominant market position, and current market dynamics poise it for continued growth in the forthcoming years. Amid the geopolitical disruptions, estimated global volume growth is expected between 5 and 6%, and head-haul and regional trade growth is expected to be 5.5-6.5%, resulting in fast growth in demand for ships in 2024.

Also, the container shipping market is expected to reach $134.03 billion by 2029, exhibiting growth at a CAGR of 3.11%, propelled by technological investments and growing global economic activities.

Danaos’ CEO, Dr. John Coustas, commented on the company’s performance during the second quarter, “With respect to our activities in the dry bulk sector, we have recently taken delivery of all ten Capesize vessels. We have been gearing up our operations to ensure the integration within our fleet during this building phase before we continue to explore opportunities to further our reach in this sector.”

Shares of DAC have surged 17.3% over the past six months and 27.8% over the past year to close its last trading session at $84.42.

Let’s look at factors that could influence DAC’s performance in the upcoming months.

Solid Financials

DAC’s operating revenues rose 2% from the prior year period to $246.31 million during the second quarter that ended June 30, 2024, of which its Drybulk Vessels revenues were $15.72 million. Also, the company’s income from operations totaled $139.98 million for the quarter. DAC’s adjusted net income and adjusted EPS stood at $132.31 million and $6.78 for the period, respectively.

Furthermore, net cash provided by operating activities increased 0.8% from the year-ago value to $154.28 million. The company’s adjusted EBITDA came in at $176.79 million over the quarter.

Robust Historical Growth

DAC’s revenue and EBITDA have improved at respective CAGRs of 24.1% and 25.6% over the past three years. The company’s EBIT has increased 32.7% over the same timeframe, while its normalized net income has grown at a CAGR of 40.5%.

Also, the company’s tangible book value and total assets have increased at respective CAGRs of 24.1% and 8.1% over the same period.

Favorable Analyst Estimates

Street expects DAC’s EPS for the current quarter (ending December 2024) to increase 4.2% from the year-ago value to $7.29, while its revenue estimate of $266.97 million reflects a growth of 11.7% year-over-year. It has also maintained an optimistic surprise history, surpassing the consensus revenue estimates in three trailing four quarters.

Moreover, for the fiscal year ending December 2024, DAC’s revenue is expected to increase 6% year-over-year to $1.02 billion, and its EPS is anticipated to be $28.08, respectively.

Robust Profitability

DAC’s trailing-12-month gross profit margin and EBIT margin of 74.67% and 55.77% are 134.7% and 454.2% higher than the respective industry averages of 31.81% and 10.06%, respectively. Its trailing-12-month net income margin of 58.15% is significantly higher than the 6.17% industry average.

Furthermore, the stock’s trailing-12-month ROCE, ROTC, and ROTA of 18.95%, 9.77%, and 14.20% favorably compare to the industry averages of 12.83%, 7.25%, and 4.93%, respectively. Similarly, its trailing-12-month EBITDA margin of 68.09% is higher than the industry average of 14.03%.

POWR Ratings Exhibit Solid Prospects

DAC’s solid fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, translating to a Buy in our proprietary system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.

Our proprietary rating system also evaluates each stock based on eight distinct categories. DAC has a B grade for Quality, consistent with its higher-than-industry profitability.

Also, with a 24-month beta of 0.40, the stock earned a B grade for Stability.

The stock is ranked #16 out of 36 stocks in the A-rated Shipping industry. Click here to access DAC’s Sentiment, Value, Momentum, and Growth ratings.

Bottom Line

DAC continues to remain a strong and dominant player in the shipping industry with its continuously expanding fleet, strong demand, solid market position, and strategic multi-year charter arrangements.

During the second quarter, the company took deliveries of containerships and vessels, projecting robust future expansion plans. Also, the company maintains a low-debt position providing ample financial flexibility.

Given the solid financials, accelerating profitability, and promising growth outlook, this shipping stock could be an ideal buy now.

How Does Danaos Corporation (DAC) Stack Up Against Its Peers?

While DAC has an overall POWR Rating of B, investors could also check out these other stocks within the A-rated Shipping industry with A (Strong Buy) or B (Buy) ratings: BW LPG Limited (BWLP), Dynagas LNG Partners LP (DLNG), and Global Ship Lease Inc. Cl A (GSL).

To explore more A and B-rated shipping stocks, click here.

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DAC shares were unchanged in after-hours trading Monday. Year-to-date, DAC has gained 18.57%, versus a 23.95% rise in the benchmark S&P 500 index during the same period.

About the Author: Rjkumari Saxena

Rajkumari started her career as a writer but gradually shifted her focus to financial journalism, leveraging her educational background in Commerce. Fascinated by the interplay of business and economic shifts in equities, she aspires to evolve as an analyst. With a knack for simplifying complex financial concepts, her mission is to empower investors with insights that lead to profitable decisions. More...

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