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4 Shipping Stocks to Capitalize on Rosy Industry Prospects
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The Zacks Transportation - Shipping industry is riding the wave of solid demand for goods and commodities. This favorable environment is likely to aid industry participants for the remainder of the year. The wave of optimism signals a significant upside for shipping firms like Golar LNG (GLNG - Free Report) , Scorpio Tankers (STNG - Free Report) , Ardmore Shipping (ASC - Free Report) and Euroseas (ESEA - Free Report) .
Given the resumption of economic activities and an uptick in world trade, these companies should generate impressive revenues. We note that shipping stocks are responsible for transporting the bulk of the goods involved in global trade.
About the Industry
The companies housed in the Zacks Transportation - Shipping industry offer liquefied natural gas and crude oil marine transportation services under long-term, fixed-rate contracts with major energy and utility companies. Most participants focus on the global seaborne transportation of crude oil and other oil products. The industry also includes players that own, operate and manage liquefied natural gas carriers. Some participants are owners and operators of containerships for charter. The change in the e-commerce landscape amid the coronavirus-scarred scenario implies that shippers are relying more on third-party logistics providers. The well-being of the companies in this industrial cohort is directly proportional to the health of the economy. Strength in manufactured and retail goods, and improving global economic conditions bode well for the industry participants.
3 Key Investing Trends to Watch in the Transportation -- Shipping Industry
Uptick in Trading Volumes Bodes Well: The ramp-up in economic activities and trade volumes is a huge boon for the shipping stocks. As the same is responsible for carrying bulk goods — both finished products and raw materials — including agricultural products, revenues and profitability of the said stocks are tied to economic growth. With growth picking up, courtesy of relaxed COVID-related restrictions, stocks in this industry should benefit at least in the near term. With demand for goods and commodities likely to remain strong and capacity being limited, rates should remain high. This augurs well for the industry participants.
Shareholder-Friendly Measures Pick Up the Pace: With the reopening of the economy, many companies, including those in the shipping domain, are reactivating their shareholder-oriented moves, thereby underlining their financial strength and confidence in the business. As investors prefer an income-generating stock, a dividend-yielding one is much coveted.
Bottom Line to Take a Hit From Steep Oil Price: The current upsurge in oil price does not augur well for any transportation stock as far as its bottom-line growth is concerned. This is because fuel expenses represent a key input cost for a transportation player and shipping stocks are no exceptions. Oil prices escalated 48% in first-half 2022 because of the Russia-Ukraine war. Per the U.S. Energy Information Administration (EIA), the average Brent crude oil spot price will be $105 per barrel for the current year.
Zacks Industry Rank Indicates Sunny Prospects
The Zacks Transportation - Shipping industry is a 42-stock group within the broader Zacks Transportation sector. The industry currently carries a Zacks Industry Rank #40, which places it in the top 16% of 250 plus Zacks industries.
The group’s Zacks Industry Rank, basically the average of the Zacks Rank of all the member stocks, indicates bright near-term prospects. Our research shows that the top 50% of the Zacks-ranked industries outperforms the bottom 50% by a factor of more than 2 to 1.
The industry’s positioning in the top 50% of the Zacks-ranked industries is a result of a positive earnings outlook for the constituent companies in aggregate. Looking at the aggregate earnings estimate revisions, it appears that analysts are gradually gaining confidence in this group’s earnings growth potential. Evidently, the industry’s earnings estimate for 2022 surged 76% year over year.
Before we present a few stocks that you may want to add to your portfolio. Let’s look at the industry’s recent stock-market performance and its valuation picture.
Industry Outperforms S&P 500 and Sector
The Zacks Transportation - Shipping industry has outperformed the Zacks S&P 500 composite and the broader Transportation Sector over the past year.
The industry has gained 13.1% over this period against the S&P 500’s depreciation of 13.2% and the broader sector’s decline of 12%.
One-Year Price Performance
The Valuation Picture
Based on the trailing 12-month enterprise value-to-EBITDA (EV/EBITDA), a commonly used multiple for valuing shipping stocks, the industry is currently trading at 3.51X compared with the S&P 500’s 12.3X. It is also below the sector’s trailing-12-month EV/EBITDA of 11.28X.
Over the past five years, the industry has traded as high as 14.39X, as low as 3.12X and at the median of 7.73X.
Trailing 12-Month Enterprise Value-to EBITDA (EV/EBITDA) Ratio
4 Transportation -Shipping Stocks Worth Adding to Your Portfolio
Golar LNG: Upbeat demand for liquefied natural gas (LNG) bodes well for GLNG. The surging inflation shot up oil and natural gas prices. Moreover, amid the Russia-Ukraine war, Europe is likely to seek gas supplies outside Russia. This is expected to drive demand for LNG vessels.
Golar LNG currently sports a Zacks Rank #1 (Strong Buy). GLNG shares have skyrocketed 142.6% in a year’s time. Over the past 60 days, the Zacks Consensus Estimate for 2022 earnings has moved 8.8% north.
Scorpio Tankers is engaged in the seaborne transportation of refined petroleum products via the global shipping markets. Efforts to upgrade its fleet are commendable. Uptick in voyage revenues with the rise in passengers augurs well for this shipping stock, sporting a Zacks Rank of 1 at present.
STNG’s shares have soared 156.6% in a year’s time. Over the past 60 days, the Zacks Consensus Estimate for 2022 earnings has moved 92.6% north.
Price and Consensus: STNG
Pembroke, Bermuda-based Ardmore Shipping transports petroleum products and chemicals worldwide through voyage charters, commercial pools and time charters. Its customers include oil companies, oil and chemical traders, chemical companies and pooling service providers.
Bullishness surrounding the tanker market is serving Ardmore Shipping well, which is currently flaunting a Zacks Rank #1.The stock has jumped 174.2% in a year’s time. Over the past 60 days, the Zacks Consensus Estimate for 2022 earnings has moved 171.9% north.
Price and Consensus: ASC
Euroseas is benefiting from the uptick in economic activities. Increased charter rates in container ship markets are aiding its topline. Management's decision to reinstate the quarterly dividend and approve a $20-million share buyback program after a long gap is encouraging.
ESEA is presently Zacks #1Ranked. Over the past 60 days, the Zacks Consensus Estimate for 2022 earnings has moved 6.6% north. Current-year earnings are expected to surge 156.7% from the year-ago reported number.
Price and Consensus: ESEA
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4 Shipping Stocks to Capitalize on Rosy Industry Prospects
The Zacks Transportation - Shipping industry is riding the wave of solid demand for goods and commodities. This favorable environment is likely to aid industry participants for the remainder of the year. The wave of optimism signals a significant upside for shipping firms like Golar LNG (GLNG - Free Report) , Scorpio Tankers (STNG - Free Report) , Ardmore Shipping (ASC - Free Report) and Euroseas (ESEA - Free Report) .
Given the resumption of economic activities and an uptick in world trade, these companies should generate impressive revenues. We note that shipping stocks are responsible for transporting the bulk of the goods involved in global trade.
About the Industry
The companies housed in the Zacks Transportation - Shipping industry offer liquefied natural gas and crude oil marine transportation services under long-term, fixed-rate contracts with major energy and utility companies. Most participants focus on the global seaborne transportation of crude oil and other oil products. The industry also includes players that own, operate and manage liquefied natural gas carriers. Some participants are owners and operators of containerships for charter. The change in the e-commerce landscape amid the coronavirus-scarred scenario implies that shippers are relying more on third-party logistics providers. The well-being of the companies in this industrial cohort is directly proportional to the health of the economy. Strength in manufactured and retail goods, and improving global economic conditions bode well for the industry participants.
3 Key Investing Trends to Watch in the Transportation -- Shipping Industry
Uptick in Trading Volumes Bodes Well: The ramp-up in economic activities and trade volumes is a huge boon for the shipping stocks. As the same is responsible for carrying bulk goods — both finished products and raw materials — including agricultural products, revenues and profitability of the said stocks are tied to economic growth. With growth picking up, courtesy of relaxed COVID-related restrictions, stocks in this industry should benefit at least in the near term. With demand for goods and commodities likely to remain strong and capacity being limited, rates should remain high. This augurs well for the industry participants.
Shareholder-Friendly Measures Pick Up the Pace: With the reopening of the economy, many companies, including those in the shipping domain, are reactivating their shareholder-oriented moves, thereby underlining their financial strength and confidence in the business. As investors prefer an income-generating stock, a dividend-yielding one is much coveted.
Bottom Line to Take a Hit From Steep Oil Price: The current upsurge in oil price does not augur well for any transportation stock as far as its bottom-line growth is concerned. This is because fuel expenses represent a key input cost for a transportation player and shipping stocks are no exceptions. Oil prices escalated 48% in first-half 2022 because of the Russia-Ukraine war. Per the U.S. Energy Information Administration (EIA), the average Brent crude oil spot price will be $105 per barrel for the current year.
Zacks Industry Rank Indicates Sunny Prospects
The Zacks Transportation - Shipping industry is a 42-stock group within the broader Zacks Transportation sector. The industry currently carries a Zacks Industry Rank #40, which places it in the top 16% of 250 plus Zacks industries.
The group’s Zacks Industry Rank, basically the average of the Zacks Rank of all the member stocks, indicates bright near-term prospects. Our research shows that the top 50% of the Zacks-ranked industries outperforms the bottom 50% by a factor of more than 2 to 1.
The industry’s positioning in the top 50% of the Zacks-ranked industries is a result of a positive earnings outlook for the constituent companies in aggregate. Looking at the aggregate earnings estimate revisions, it appears that analysts are gradually gaining confidence in this group’s earnings growth potential. Evidently, the industry’s earnings estimate for 2022 surged 76% year over year.
Before we present a few stocks that you may want to add to your portfolio. Let’s look at the industry’s recent stock-market performance and its valuation picture.
Industry Outperforms S&P 500 and Sector
The Zacks Transportation - Shipping industry has outperformed the Zacks S&P 500 composite and the broader Transportation Sector over the past year.
The industry has gained 13.1% over this period against the S&P 500’s depreciation of 13.2% and the broader sector’s decline of 12%.
One-Year Price Performance
The Valuation Picture
Based on the trailing 12-month enterprise value-to-EBITDA (EV/EBITDA), a commonly used multiple for valuing shipping stocks, the industry is currently trading at 3.51X compared with the S&P 500’s 12.3X. It is also below the sector’s trailing-12-month EV/EBITDA of 11.28X.
Over the past five years, the industry has traded as high as 14.39X, as low as 3.12X and at the median of 7.73X.
Trailing 12-Month Enterprise Value-to EBITDA (EV/EBITDA) Ratio
4 Transportation -Shipping Stocks Worth Adding to Your Portfolio
Golar LNG: Upbeat demand for liquefied natural gas (LNG) bodes well for GLNG. The surging inflation shot up oil and natural gas prices. Moreover, amid the Russia-Ukraine war, Europe is likely to seek gas supplies outside Russia. This is expected to drive demand for LNG vessels.
Golar LNG currently sports a Zacks Rank #1 (Strong Buy). GLNG shares have skyrocketed 142.6% in a year’s time. Over the past 60 days, the Zacks Consensus Estimate for 2022 earnings has moved 8.8% north.
You can see the complete list of today’s Zacks #1 Rank stocks here
Price and Consensus: GLNG
Scorpio Tankers is engaged in the seaborne transportation of refined petroleum products via the global shipping markets. Efforts to upgrade its fleet are commendable. Uptick in voyage revenues with the rise in passengers augurs well for this shipping stock, sporting a Zacks Rank of 1 at present.
STNG’s shares have soared 156.6% in a year’s time. Over the past 60 days, the Zacks Consensus Estimate for 2022 earnings has moved 92.6% north.
Price and Consensus: STNG
Pembroke, Bermuda-based Ardmore Shipping transports petroleum products and chemicals worldwide through voyage charters, commercial pools and time charters. Its customers include oil companies, oil and chemical traders, chemical companies and pooling service providers.
Bullishness surrounding the tanker market is serving Ardmore Shipping well, which is currently flaunting a Zacks Rank #1.The stock has jumped 174.2% in a year’s time. Over the past 60 days, the Zacks Consensus Estimate for 2022 earnings has moved 171.9% north.
Price and Consensus: ASC
Euroseas is benefiting from the uptick in economic activities. Increased charter rates in container ship markets are aiding its topline. Management's decision to reinstate the quarterly dividend and approve a $20-million share buyback program after a long gap is encouraging.
ESEA is presently Zacks #1Ranked. Over the past 60 days, the Zacks Consensus Estimate for 2022 earnings has moved 6.6% north. Current-year earnings are expected to surge 156.7% from the year-ago reported number.
Price and Consensus: ESEA