Even though the COVID-19 pandemic diminished demand in the shipping industry last year, rising freight rates and improved transport activities have brought considerable improvement this year. With the resumption of global import and export activities, the shipping industry should see a substantial increase in demand. The industry is enjoying favorable investor sentiment too, as evidenced by Breakwave Dry Bulk Shipping ETF’s (BDRY) 255.5% returns over the past year compared to SPDR S&P 500’s (SPY) 14.8% gains. Also, the global cargo shipping market is expected to grow at a 3.1% CAGR over the next four years to hit $14.20 billion in 2025.
But,while several companies in the industry have regained substantial momentum, Castor Maritime Inc. (CTRM) has lagged. Shares of CTRM have declined 18.9% over the past year. Also, in its last reported quarter, the company has reported a $1.75 million net loss and a $0.03 per share loss.
Conversely, Nippon Yusen Kabushiki Kaisha (NPNYY), Costamare Inc. (CMRE), and Danaos Corporation (DAC) are fundamentally sound stocks in the sector. These stocks are well positioned to capitalize on the industry’s rebound, and we think it could be wise to invest in them now.
Nippon Yusen Kabushiki Kaisha (NPNYY)
Headquartered in Tokyo, Japan and founded in 1885, NPNYY provides sea, land and air transportation services worldwide. In addition, the company is involved in the supply chain for oil and natural gas. It also operates Asuka II, a luxury cruise ship, and manages commercial and residential buildings.
This month, NPNYY and Akita Eisen KK signed a Memorandum of Understanding (MoU) for a crew transfer vessel (CTV) business related to offshore wind power generation, mainly in the waters off Akita prefecture. The aim is to install stations capable of producing 30-45 million kilowatts as an important future source of electricity, which is in line with the Japanese Governments’ goal of reducing greenhouse gas emissions to zero by 2050.
Also in April, the company entered a new project with major companies worldwide to establish standards for the safe use of ammonia as a marine fuel. The initiative was undertaken in response to the International Maritime Organisation’s (IMO) goal of cutting greenhouse gas emissions from shipping by at least 50 percent by 2050.
NPNYY’s operating profit has increased 47.3% year-over-year to ¥ 57 million in the year ended March 31, 2020, while its recurring profit grew 259.7% from its year-ago value to ¥160 million. The company’s profit per share came in at ¥533.0 over this period.
A $14.82 billion consensus revenue estimate for the fiscal period ended March 2021 represents a 138.3% increase from the same period last year. The stock has gained 195.5% over the past year.
NPNYY’s POWR Ratings reflect this promising outlook. The company has an overall rating of B, which translates to Buy in our proprietary ratings system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
NPNYY is also rated a B in Growth, Value, and Stability. Within the C-rated Shipping industry, it is ranked #10 of 48 stocks.
To see additional POWR Ratings for Momentum, Sentiment, and Quality for NPNYY, Click here.
Costamare Inc. (CMRE)
Based in Monaco, CMRE is a leading international owner of containerships serving open carries to liner companies worldwide. As of February 1, the company had a fleet of 77 containerships with a total capacity of approximately 555,810 20-foot equivalent units, including one vessel under construction and four secondhand vessels.
On April 26, CMRE York Capital’s 60% equity interest, on average, in five 11,000 TEU containerships. The acquisition has brought the company’s ownership interest in these five vessels to 100%.
In the fourth quarter, ended December 31, 2020, CMRE reported $27.08 million in net income. The company’s EPS came in at $0.26 over this period.
CMRE is expected to see 29.7% revenue growth of 29.7% in 2021. Its EPS was estimated to increase 72.5% in the current year. Over the past year, CMRE’s stock has gained 95.6%.
CMRE’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, which equates to Buy in our POWR Ratings system. CMRE has a B grade for Sentiment and Quality also. Among the 48 stocks in the same industry, it is ranked #9.
Click here to see the additional POWR Ratings for CMRE. (Growth, Stability, Value, and Momentum).
Danaos Corporation (DAC)
Formerly known as Danaos Holdings Limited, DAC is one of the largest independent owners of modern, large-size containerships. As of February 28, 2021, it had a fleet of 65 containerships, aggregating 403,793 20-foot equivalent units in capacity. DAC was founded in 1972 and is based in Piraeus, Greece.
In the fourth quarter, ended December 31, 2020, DAC’s net income increased 27.7 year-over-year to $43.18 million. The company’s operating revenue increased 8.6% from its year-ago value to $119.64 million, while its adjusted EBITDA grew 6.2% year-over-year to $83.01 million. Its EPS increased 15.6% year-over-year to $2.07 over the same period.
The company’s EPS is expected to grow 116.4% to $2.90 for the current quarter, ended March 2021. The Street expects DAC’s revenue to increase 24.7% to $145.63 million in the next quarter, ending June 2021. DAC’s stock has gained 1015.2% over the past year.
DAC’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, which equates to Buy in our POWR Ratings system. DAC also has a B grade for Growth and Quality. The stock is ranked #7 in the same industry.
In addition to the POWR Ratings grades we’ve just highlighted, one can see the DAC ratings for Value, Momentum, Sentiment, and Stability here.
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NPNYY shares were trading at $7.60 per share on Tuesday afternoon, down $0.08 (-0.98%). Year-to-date, NPNYY has gained 62.57%, versus a 12.19% rise in the benchmark S&P 500 index during the same period.
About the Author: Samiksha Agarwal
Samiksha Agarwal has always had a keen interest in financial markets. This has led her to a career as a financial journalist. Through her extensive knowledge of fundamental analysis, her goal is to help investors identify untapped investment opportunities in the stock market. More...
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