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Why Frontline (FRO) Shares Are Down 10.7% Since Q3 Earnings Miss

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Frontline Ltd.’s (FRO - Free Report) third-quarter 2020 earnings of 29 cents per share fell short of the Zacks Consensus Estimate of 35 cents. Results were hurt by the 19.3% increase in ship operating expenses due to higher dry docking costs and coronavirus-induced additional crew expenses. Moreover, demand for oil and gas is still suppressed, thereby reducing the need for tankers. However, the bottom line rebounded from a loss of 6 cents per share in the year-ago quarter.

The shipping company also reported lower-than-expected revenues due to coronavirus-induced disruptions. Revenues of $177.8 million fell short of the Zacks Consensus Estimate of $188.1 million and also fell 5.2% on a year-over-year basis. This underperformance was due to the decrease in time charter equivalent (TCE) earnings on account of lower TCE rates achieved across its fleet.

The fleet size at the end of the September quarter was 68 including 60 owned by the company (of 60 there were 15 VLCCs, 27 Suezmax tankers and 18 LR2/Aframax tankers). The spot TCEs for VLCCs, Suezmax tankers and LR2 tankers in the reported quarter of 2020 were $49,200, $25,100 and $12,800 per day, respectively.

Frontline Ltd. Price, Consensus and EPS Surprise

Frontline Ltd. Price, Consensus and EPS Surprise

Frontline Ltd. price-consensus-eps-surprise-chart | Frontline Ltd. Quote

 

No doubt, the lower-than-expected earnings per share and revenues disappointed investors.  But worse than that was this currently Zacks Rank #4 (Sell) company’s decision not to pay any cash dividend for the third quarter, which primarily resulted in the 10.7% stock price decline since the earnings release on Nov 25. The company’s board of directors attributed this stance to the near-term uncertainty.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The company’s interim CEO Lars Barstad was quoted saying, "Q3 earnings were good but our visibility looking into Q4 doesn't look great. We are in the middle of a global pandemic. We decided to keep the cash."

Sectorial Snapshots

Let’s take a look into some other Zacks Transportation sector companies’ third-quarter results.

Expeditors International of Washington (EXPD - Free Report) reported third-quarter 2020 earnings of $1.12 per share, surpassing the Zacks Consensus Estimate of 98 cents. Total revenues of $2,464.8 million also beat the Zacks Consensus Estimate of $2,315.1 million.

Gol Linhas Aereas Inteligentes (GOL - Free Report) incurred a loss (excluding 89 cents from non-recurring items) of 91 cents per share in the third quarter of 2020, wider than the Zacks Consensus Estimate of a loss of 80 cents. Net operating revenues of $181.4 million also missed the Zacks Consensus Estimate of $188 million.

Schneider National (SNDR - Free Report) reported third-quarter earnings (excluding 6 cents from non-recurring items) of 31 cents per share, matching the Zacks Consensus Estimate. Operating revenues of $1,135.7 million surpassed the Zacks Consensus Estimate of $1,122.1 million.

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