The prospects for the shipping industry appear favorable, with opportunities for continued expansion and innovation on the horizon. Moreover, tensions in the Red Sea have forced ships to travel further, thus raising freight costs. Higher freight costs are expected to translate into better margins for shipping companies.
Amid this backdrop, investors could consider buying high-momentum shipping stocks such as Seanergy Maritime Holdings Corp. (SHIP) and Teekay Corporation (TK). Before exploring the fundamentals of these stocks, let’s first understand what’s shaping the shipping industry’s prospects.
The shipping industry is poised for significant growth in the coming years thanks to increasing international trade, technological advancements leading to more efficient and sustainable shipping practices, a growing demand for e-commerce and fast delivery services, and the expansion of emerging markets.
Additionally, the industry is expected to benefit from developing new shipping routes, modernizing port infrastructure, and adopting digitalization and automation in logistics processes. Houthi rebels have launched attacks on vessels heading to the Suez Canal, leading to a rise in global shipping prices and fueling fears of product shortages and delays.
Additionally, a severe drought in Central America has caused water levels in the Panama Canal to drop, forcing authorities to limit the number of ships passing through. This disruption in shipping is causing carriers to raise rates and could potentially lead to waterborne gridlock, impacting retailers and potentially exacerbating inflation.
Meanwhile, free trade agreements, new port construction, and the growth of various cargo import and export markets are driving the expansion of the cargo shipping industry. Market demand is rising, port infrastructure is improving, and government support contributes to the industry's growth. The cargo shipping industry is projected to reach $23.40 billion by 2032, growing at a 5.1% CAGR.
Considering these conducive trends, let’s examine the fundamentals of the two Shipping stock picks, starting with the second in line.
Stock #2: Seanergy Maritime Holdings Corp. (SHIP)
Headquartered in Glyfada, Greece, SHIP provides seaborne transportation of dry bulk commodities worldwide. It operates a fleet of 16 Capesize dry bulk vessels and one Newcastlemax dry bulk vessel with a cargo-carrying capacity of approximately 3,054,820 dwt.
On June 13, 2024, SHIP announced the delivery of a Capesize vessel acquisition, the M/V Iconship, and the simultaneous commencement of its time charter employment. The Vessel is a 181,392 dwt Capesize bulk carrier built in Japan in 2013 by Imabari Shipbuilding Co., Ltd. The delivery of the M/V Iconship has enabled SHIP to capitalize on the favorable market conditions.
SHIP’s trailing-12-month levered FCF margin of 29.41% is 364.2% higher than the industry average of 6.34%. Likewise, its trailing-12-month gross profit margin and EBIT margin of 62.04% and 26.82% are 101.3% and 163.9% higher than the industry averages of 30.81% and 10.16%, respectively.
For the fiscal first quarter that ended March 31, 2024, SHIP’s net revenue and adjusted EBITDA stood at $38.29 million and $23.20 million, up 112.4% and 494.5% year-over-year, respectively. For the same quarter, its adjusted net income and earnings per common share amounted to $11.18 million and $0.57, respectively, compared to adjusted net loss and loss per common share of $433 thousand and $0.02 in the year-ago quarter.
Street expects SHIP’s EPS for the quarter that ended June 30, 2024, to increase considerably year-over-year to $0.53. Its revenue for the same quarter is expected to rise 43.6% year-over-year to $40.68 million. The company surpassed consensus revenue estimates in each of the trailing four quarters, which is impressive.
SHIP has gained 114.3% over the past year, closing the last trading session at $9.87. The stock is trading above its 100-day and 200-day moving averages of $9.44 and $7.89, respectively.
SHIP’s POWR Ratings reflect this positive outlook. It has an overall rating of A, equating to a 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.
SHIP has an A grade for Growth and a B for Value, Momentum, Sentiment, and Quality. It is ranked #3 out of 43 stocks in the A-rated Shipping industry. Click here to see SHIP’s Stability rating.
Stock #1: Teekay Corporation (TK)
Headquartered in Hamilton, Bermuda, TK engages in international crude oil and other marine transportation services worldwide. The company owns and operates crude oil and refined product tankers. It also provides ship-to-ship support services, tanker commercial management operation services, and operational and maintenance marine services.
TK’s trailing-12-month asset turnover ratio of 0.65x is 30.2% higher than the industry average of 0.50x. Similarly, its trailing-12-month EBIT margin and levered FCF margin of 33.08% and 26.82% are 72% and 337.5% higher than the industry averages of 19.24% and 6.13%, respectively.
TK’s revenues for the fiscal first quarter that ended March 31, 2024, amounted to $365.05 million. Its adjusted EBITDA stood at $152.20 million. In addition, its adjusted net income attributable to shareholders of TK came to $41.01 million. Also, its adjusted net income per share attributable to shareholders of TK came in at $0.44.
Over the past year, the stock has gained 54.1%, closing the last trading session at $8.97. The stock is trading above its 50-day and 100-day moving averages of $8.70 and $8.11, respectively.
TK’s strong fundamentals are reflected in its POWR Ratings. Its overall rating is A, equating to a Strong Buy in our proprietary rating system.
It has an A grade for Value, Momentum, and Quality. It is ranked #2 in the same industry. Get TK’s Growth, Stability, and Sentiment ratings here.
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TK shares were trading at $8.84 per share on Monday morning, down $0.13 (-1.45%). Year-to-date, TK has gained 63.49%, versus a 15.19% rise in the benchmark S&P 500 index during the same period.
About the Author: Neha Panjwani
From her school days, Neha harbored a profound fascination for finance, a passion that steered her toward a career as an investment analyst following the completion of her bachelor's degree in commerce. Currently enrolled in the CFA program, Neha is dedicated to further enriching her comprehension of investment fundamentals. Neha's primary objective is to aid retail investors in discerning optimal investment opportunities by diligently evaluating crucial aspects of financial instruments, with a primary focus on stocks and ETFs. Her commitment lies in empowering individuals to make informed and strategic investment decisions in the dynamic world of finance.
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