As Freight Rates Fall, These 3 Shipping Stocks Offer Promising Journey
The year 2022 has been a story of rapidly changing fortunes. Just a few months ago, freight rates were at record highs and up to 50% higher than they were in 2021. However, in July 2022, the momentum was changing rapidly.
Amidst this dynamic, let’s take a look at three big names in shipping: Zim Integrated Shipping (ZIM), Navios Maritime Partners (NMM), and Matson (MATX), and how they’ve fared so far and what their travels might look like in the coming months.
ZIM Integrated Shipping (ZIM)
ZIM shares began trading in January 2021. This container shipping and services provider saw its share price drop 21.5% in 2022, but investors are still sitting on gains of nearly $300. % since listing.
Revenue grew from approximately $4 billion in 2020 to $10.73 billion in 2021, and is still expected to reach $13.8 billion in 2022. At the same time, net income is expected to increase to $44.50 per year. share in 2022, compared to $39 per share in 2021.
While the stock has recently taken a beating amid growing concerns over shipping rates, the street is already seeing 46.87% upside potential in the ZIM. The consensus rating for ZIM is a hold, with an average price target of $65.43.
JP Morgan’s Sam Bland reiterated a Hold rating on ZIM but raised the price target to $56.30 from $53.30.
Navios Maritime Partners (NMM)
This operator of dry cargo vessels and tankers saw its shares drop almost 19% in 2022, but is still up almost 100% from January 2021 levels. to expand its fleet, having spent $1 billion on 18 ships previously.
Last month, it agreed to pay $241.2 million for two LNG container ships. The new ships are expected to join its fleet in 2024, while Navios also has the option of acquiring two other similar ships in the next two months (delivery in 2025).
Just like ZIM, Navios has also increased its revenue from $226.8 million in 2020 to $713.2 million in 2021. This figure is expected to increase to $1.22 billion in 2022. The company’s earnings are also increased from $0.89 per share in 2020 to $15.75 per share in 2021 and are expected to rise further to $18.3 in 2022.
Notably, the street is eyeing mouth-watering gains of 157.85% in Navios at an average price target of $55. Additionally, data from TipRanks indicates that hedge funds increased their stock holdings by 594,700 shares in the last quarter. Thomas Clausus’ GMT Capital Corp is a new entrant to the stock with a position worth nearly $20.9 million.
We end our list with shipping and shipping provider Matson, which despite falling 16% in the past month is still up almost 17% in the past year.
Matson also benefited from tailwinds in shipping and saw revenue grow from $2.38 billion in 2020 to $3.93 billion in 2021. Revenue is further expected to increase to $4.47 billion. billion in 2022. Additionally, earnings are expected to grow at a faster rate to $28.8 per share in 2022 from $4.4 per share in 2020.
Benjamin Nolan of Stifel Nicolaus reiterated a buy rating on the stock but did not give it a price target. The analyst expects the company to benefit from the Ocean Shipping Reform Act.
Additionally, Matson has increased the dividend twice in the past two years and currently has a dividend yield of 1.65%, which remains a major draw for potential investors who are currently facing the double whammy of the fall. stocks and rising inflation.
In comparison, Navios has lowered its dividend over the past two years and currently offers a dividend yield of 0.94%. ZIM, on the other hand, has paid out a total of $19.85 per share in dividends so far this year and currently offers a dividend yield of 50.17%.
The United States saw its trade deficit deflate in May as consumers, faced with an aggressive Fed, reduced their purchases. Additionally, businesses are operating with well-stocked inventories, which further reduces the demand for new imports.
Nearly two years of supply chain challenges have driven freight contracts higher. As demand falters, so do freight rates. According to WSJ, short-term shipping rates slipped below long-term rates in June. This means companies are renegotiating deals or turning to the cash market to take advantage of lower rates.
While broader market swings may continue, these three aforementioned stocks have performed consistently. Additionally, alongside the expected price gains, the dividend payouts also provide potential investors with an additional cushion of capital.
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