Factors including slowing industrial production in China, surging oil prices, and a critical oil spill in Southern California have caused considerable disruptions in the global supply chain, increasing shipping costs to record highs lately. Consequently, the shipping industry witnessed a sell-off earlier this month.
However, because the demand for shipping remains elevated amid the global economic recovery, the industry should witness a solid rebound. Supply chain disruptions and higher shipping costs are expected to last until 2022, but governments worldwide are taking various steps to address these headwinds.
Thus, we think the recent sell-off provides an excellent opportunity to buy quality shipping stocks ZIM Integrated Shipping Services Ltd. (ZIM), Matson, Inc. (MATX), and Star Bulk Carriers Corp. (SBLK). These stocks are rated ‘Strong Buy’ or ‘Buy’ in our proprietary rating system.
ZIM Integrated Shipping Services Ltd. (ZIM)
ZIM is an Israel-based company that provides shipping and logistics services worldwide. The company offers multimodal cargo handling, tariff management, schedule information, and other related services, such as shipping agencies, storage, distribution, forwarding, and land transportation.
On October 6, 2021, ZIM announced the creation of a new subsidiary, Ship4wd, a digital freight forwarding platform that offers a simple and reliable self-service end-to-end shipping solution. Relying on ZIM’s vast experience and in-depth knowledge of the shipping industry, Ship4wd will target primarily U.S. & Canadian SMBs that are importing and exporting from China, Vietnam, and Israel and help manage their operations efficiently. ZIM expects to witness high demand in the future.
For its second quarter, ended June 30, 2021, ZIM’s income from voyages and related services increased 199.6% year-over-year to $2.38 billion. The company’s gross profit came in at $1.22 billion, indicating a 1092% rise from the prior year period. Its profit before income taxes came in at $1.11 billion, up 3640.8% from the year-ago period. While its net profit increased 722.2% year-over-year to $74 million, its EPS increased 3112.5% year-over-year to $7.71. ZIM had $1.55 billion in cash and cash equivalents as of June 30, 2021.
ZIM’s EPS is estimated to rise 534.5% year-over-year to $31.85 in the current year. Analysts expect its revenue to be $9.80 billion for the current year, representing a 145.6% rise year-over-year. Over the past three months, the stock has gained 26.7% in price and closed yesterday’s trading session at $50, which was 19.6% below its 52-week high of $62.20.
Two out of four Wall Street analysts that provide ratings for the stock rated it Buy. The $60.01 average price target represents a potential 20% upside.
ZIM’s POWR Ratings reflect this promising outlook. The stock has an overall A rating, which equates to Strong Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.
Matson, Inc. (MATX)
MATX in Honolulu, Hawaii, operates as an ocean freight carrier and offers multimodal transportation brokerage of domestic and international rail intermodal services, long-haul and regional highway trucking services, supply chain services, and LTL transportation services, as well as third-party logistics services. The company serves the U.S. military, freight forwarders, retailers, consumer goods, automobile manufacturers, and others.
For the second quarter, ended June 30, 2021, MATX’s total operating revenue increased 66.9% year-over-year to $874.90 million. The company’s pre-tax income was $209.90 million, up 371.7% from the prior-year period. Its net income came in at $162.50 million for the quarter, representing a 395.4% rise from the prior-year period. Its EPS increased 388.2% year-over-year to $3.71. MATX had $17.40 million in cash and cash equivalents as of June 30, 2021.
The consensus EPS estimate for MATX is expected to improve 242.8% year-over-year to $15.22 in the current year. It surpassed the Street’s EPS estimates in each of the trailing four quarters. Analysts expect MATX’s revenue to be $3.49 billion for the current year, representing a 46.4% rise from the prior-year period. The stock has gained 25.5% in price over the past three months, and closed yesterday’s trading session at $83.09, 9.5% below its 52-week- high of $91.79.
Analysts expect the stock to hit $92 in the near term, which indicates a potential 10.7% upside. The only Wall Street analyst providing a rating for the stock rated it Buy.
It’s no surprise that MATX has an overall A rating, which equates to Strong Buy in our POWR Ratings system. The stock has a B grade for Value, Growth, Momentum, and Quality. Click here to see the additional ratings for MATX’s Stability and Sentiment. MATX is ranked #2 in the Shipping industry.
Star Bulk Carriers Corp. (SBLK)
SBLK is a Greece-based shipping company that provides ocean transportation for dry bulk cargoes and offers vessel management services worldwide. The company’s vessels transport a range of major bulks, including iron ores, coal, and grains, as well as minor bulks, such as bauxite, fertilizers, and steel products.
On March 3, 2021, SBLK entered a definitive agreement with a third party pursuant to acquiring two ECO-type resale 82k dwt Kamsarmax vessels. The vessels were delivered in June and September 2021, respectively, directly from YAMIC yard (a joint venture between Mitsui & Co., Ltd. (MITSY) and Jiangsu New Yangzijiang Shipbuilding Co. Ltd.). The company expects the acquisition of these two resale vessels to further contribute to its fleet renewal efforts and initiatives.
For its fiscal second quarter, ended June 30, 2021, SBLK’s total revenues increased 113.1% year-over-year to $311.41 million. The company’s operating income came in at $141.71 million, versus a $26.25 million loss in the prior-year period. SBLK’s adjusted net income was $128.77 million for the quarter, versus a $17.99 million loss in the year-ago period. Its adjusted EPS was $1.26, versus a $0.19 loss per share in the prior-year period. The company had $237.76 million in cash and cash equivalents and restricted cash as of June 30, 2021.
Analysts expect the stock’s EPS to improve 2988.2% year-over-year in the current year to $5.25. A $1.19 billion consensus revenue estimate for the current year indicates a 71.9% year-over-year improvement. SBLK has gained 33.5% in price over the past three months and ended yesterday’s trading session at $23.22, 10.7% below its 52-week high of $26.
Wall Street analysts expect the stock to hit $36 in the near term, which indicates a 55% potential upside. Three Wall Street analysts rating the stock have rated it Buy.
SBLK’s POWR Ratings reflect this promising outlook. The stock has an overall B rating, which equates to Buy in our proprietary rating system.
The stock has an A grade for Growth, and a B grade for Sentiment and Momentum. Click here to see the additional ratings for SBLK’s Value, Quality, and Stability. SBLK is ranked #13 in the same industry.
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ZIM shares fell $0.02 (-0.04%) in after-hours trading Thursday. Year-to-date, ZIM has gained 329.74%, versus a 22.51% rise in the benchmark S&P 500 index during the same period.
About the Author: Sweta Vijayan
Sweta is an investment analyst and journalist with a special interest in finding market inefficiencies. She’s passionate about educating investors, so that they may find success in the stock market. More...
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