ZIM Integrated Shipping Services Ltd. (ZIM Quick QuoteZIM - Free Report) reported better-than-expected third-quarter 2024 earnings per share on Nov. 20. Earnings and revenues surpassed the Zacks Consensus Estimate by 25.4% and 25%, respectively. The third-quarter results were driven by strong freight rates and carried volumes.

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Highlights of ZIM’s Q3 Earnings

ZIM’s third-quarter 2024 earnings of $9.34 per sharebreezed past the Zacks Consensus Estimate of $7.45. In the year-ago quarter, the container liner shipping company had incurred a loss of $1.97 per share. Quarterly revenues of $2.77 billion beat the Zacks Consensus Estimate of $2.21 billion. In the year-ago quarter, the shipping company had reported revenues of $1.27 billion.

Carried volume in the third quarter increased 12% year over year to 970 thousand TEUs (twenty-foot equivalent unit). The average freight rate per TEU in the September quarter surged 118% year over year to $2,480. Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) in the September quarter skyrocketed 626% year over year to $1.53 billion.

Management attributed the strong year-over-year improvements to the addition of the latest, larger and cost-effective ships to its fleet. The uptick in demand for ocean shipping also boosted ZIM’s quarterly performance.

Rosy Dividends & Raised EBITDA View Add to ZIM Stock’s Sheen

Apart from the solid top and bottom-line performances in the September quarter, ZIM’s board declared a regular dividend of approximately $340 million or $2.81 per ordinary share, sticking to its policy of returning 30% of net income to its shareholders. The shipping company’s quarterly dividend tripled quarter over quarter.

Additionally, the board declared a special dividend of approximately $100 million, translating into 84 cents per share. The total payout, therefore, comes in at $3.65 per share. The dividend (both regular and special) will be paid out on Dec. 9, 2024, to holders of ZIM ordinary shares of record as of Dec. 2.

ZIM’s shareholder-friendly approach throws light on its financial prosperity. The shipping company’s high dividend yield is a huge positive for income-seeking investors. This highlights confidence in its cash flow and prospects.

ZIM raised its guidance for 2024 adjusted EBITDA. The shipping company expects the metric to be $3.3-$3.6 billion (compared with the earlier stated $2.6-$3 billion). Adjusted EBIT (earnings before interest and taxes) for 2024 is expected to be $2.15-$2.45 billion.

Red Sea Crisis: A Huge Boon for ZIM

Heightened freight rates due to the Red Sea Shipping crisis are turning out to be a huge positive for ZIM. The crisis caused by the attacks by Yemen’s Houthi militants on vessels in the Red Sea has prompted many shipping companies, including ZIM, to hit pause as far as transit through this route is concerned. They are using the longer and costlier route around the Cape of Good Hope in South Africa rather than going through the Suez Canal. Reduced container availability due to the Red Sea tensions has resulted in higher freight costs.

On account of the disruptions, ZIM’s profits, revenues and carried volumes for the first nine months of 2024 have surged. The Israeli shipping company reported a 58.2% year-over-year uptick in revenues in the first nine months of 2024 to $6.26 billion. EBIT on an adjusted basis in the same period turned to a profit of $1.89 billion against the loss of $373 million in the first nine months of 2023. Carried volumes increased 10.9% in the first nine months, with average freight rates rising 53% year over year in the same timeframe.

ZIM Stock’s Strong Performance

Driven by the Red Sea crisis-induced tailwinds, ZIM shares have performed exceedingly well on the bourses, handily outperforming its industry.

YTD Share Price Comparison

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Further Factors Working in Favor of ZIM Stock

ZIM’s asset-light model, which means that the focus is more on leasing rather than owning vessels, allows it to adjust capacity rapidly in response to market changes. This practice helps it boost profits during high demand.

The company’s focus on niche markets and high-margin trade routes helps it avoid crowded, low-margin segments, thereby maintaining strong pricing power. This, too, aids profitability. The shipping company’s operational efficiency is being driven by investments in digitalization and innovative technologies. This not only boosts ZIM’s bottom line but allows it to take advantage of emerging trends, such as the increased demand for eco-friendly shipping solutions.

ZIM’s Earnings Estimates Move North

The Zacks Consensus Estimate for ZIM’s fourth quarter and 2024 earnings per share has displayed a double-digit increase each in the past 60 days. The positive revision trend reflects confidence in ZIM’s ability to continue delivering strong financial performances.

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The company’s long-term (3-5 years) earnings growth rate is an impressive 47.4%, higher than its industry’s 29.4%.

ZIM’s Cheap Valuation Acts as Another Positive

ZIM’s valuation is cheap at the moment, as suggested by the Value Score of A, which makes the stock attractive. In terms of the forward 12-month price/sales ratio, ZIM is trading at 0.51X, higher than the industry’s 2.33X.

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ZIM is also cheaper in valuation than fellow industry players Seanergy Maritime Holdings (SHIP Quick QuoteSHIP - Free Report) and Euroseas Limited (ESEA Quick QuoteESEA - Free Report) .

Final Thoughts: Buy ZIM Now

Given the positivities surrounding the company, as highlighted throughout the write-up, we believe that investors should add the Zacks Rank #1 (Strong Buy) stock to their portfolios for healthy returns following the stellar performance displayed by ZIM in third-quarter 2024. The company’s current Zacks Rank supports our stance. You can see the complete list of today’s Zacks #1 Rank stocks here