TK Shipping Outlook Adjusted

We are maintaining our Hold on Teekay Corporation (TK - Analyst Report), but reducing our target price to $16. Yesterday, TK issued a press release stating that it expects to report third quarter results in January upon completion of review by its auditors. In the meantime, TK believes that EPS will come in higher than the current $1.01 consensus estimate.

This view is supported strong spot tanker freight rates, reflecting higher volumes of OPEC oil production and rising crude oil import volumes into the United States, China and India, as well as a dampening of tanker supply growth due to the removal of tankers from the global fleet for conversion and scrapping.

We are raising our 2008 diluted EPS estimate to $4.00 from $3.75, but cutting our 2009 estimate to $2.75 from $4.00. Results should reflect the impact of global economic weakening on both spot rates and shipping volumes. We note that TK recently released restated financial results for the first half related to changes in the accounting treatment for derivatives, which we have incorporated into our full report.

TK also recently announced a 15% increase in the annual dividend rate to $1.265 and a $200 million stock repurchase plan.

Read the full analyst report on TK