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Cruise Along in the Market With These 3 Shipping Stocks

Coming off two back-to-back weeks in the green, the market looks to continue its ascent from recent lows and chain together another solid weekly performance. The favorable action we’ve seen over the past few weeks has been much welcomed and has given many investors a sense of relief.

As the market continues its cruise, so do stocks in the Zacks Transportation – Shipping Industry. The industry has a year-to-date return of nearly 35% with high-quality companies leading the way. Let’s look at three of these stocks and analyze why I believe they would be solid portfolio additions.

Zacks Investment Research
Zacks Investment Research


Image Source: Zacks Investment Research

ZIM Integrated Shipping Services

ZIM Integrated Shipping Services ZIM provides customers with innovative seaborne transportation and logistics services covering the world’s major trade routes, focusing on select markets with competitive advantages that allow the company to maximize its market position.

A rapidly increasing consensus estimate trend across multiple timeframes has propelled the company’s shares by 23% year-to-date, easily beating the general market’s performance. The next quarter’s earnings estimate has increased 60% to $12.65 over the last 60 days, and the subsequent quarter’s consensus estimate has increased 200% to $10.03 per share. Analysts have been revising current and next year’s earnings estimates as well, with the current full-year earnings estimate increasing 66% to $36.76 per share and next year’s consensus estimate now reflecting full-year earnings of $14.68 per share.

ZIM Integrated Shipping Services Ltd. Price, Consensus and EPS Surprise

ZIM Integrated Shipping Services Ltd. Price, Consensus and EPS Surprise
ZIM Integrated Shipping Services Ltd. Price, Consensus and EPS Surprise

ZIM Integrated Shipping Services Ltd. price-consensus-eps-surprise-chart | ZIM Integrated Shipping Services Ltd. Quote

The company has a Style Score of A for Value, represented by its attractively low forward earnings multiple of 1.9X. Dating back to its IPO in January 2021, the current ratio is considerably lower than its high of 4.8X in May 2021, lower than its 2022 high of 3.2X, and slightly higher than its low of 1.3X in December 2021. Additionally, the value is notably lower than the industry’s average of 4.4X.

ZIM’s TTM Return on Equity (ROE), a gauge of how efficiently a company generates profits, is remarkably high as well. The company’s current ROE sits at 201%, much higher than the industry’s 12% average. ZIM has a four-quarter trailing average EPS surprise of an impressive 23% and has beat estimates in each quarter since its IPO. Additionally, the company sports a Zacks Rank #1 (Strong Buy) and has an overall VGM Score of an A.

The company’s unique market selection strategy as a digital-oriented, asset-light, global niche carrier provides a distinct advantage that allows ZIM to provide innovative and premium customer-centric services while maximizing its bottom line. Additionally, earnings estimates have increased across the board, market performance has been stellar, and the company sports an enticingly low forward earnings multiple. These are all reasons why I believe ZIM would be a great portfolio addition.

Global Ship Lease

Global Ship Lease GSL leases operationally flexible, reliable, fuel-efficient, well-specified containers to customers. The company focuses on mid-size and smaller containerships, deemed the workhorses of the global fleet.

Analysts have been revising their earnings estimates upwardly over the last 60 days, boosting next quarter’s EPS estimate by 25% to $1.91 per share and the following quarter’s estimate by 28% to $1.86 per share. The current year’s EPS estimate has climbed 7% to $7.79 per share, and next year’s EPS estimate hasn’t witnessed any estimate revisions. A more robust earnings outlook has increased share value by 28% year-to-date, outpacing the S&P 500.

Global Ship Lease, Inc. Price, Consensus and EPS Surprise

Global Ship Lease, Inc. Price, Consensus and EPS Surprise
Global Ship Lease, Inc. Price, Consensus and EPS Surprise

Global Ship Lease, Inc. price-consensus-eps-surprise-chart | Global Ship Lease, Inc. Quote

The company’s low forwards-earnings multiple has helped GSL achieve a Style Score of B for Value. The current P/E ratio of 3.6X is lower than the industry’s average, higher than its low of 1.4X in March 2020, and much lower than its high of 8.8X in January 2021.

GSL’s TTM Return on Equity value of nearly 28% is more than enough to beat out the industry’s average and display management’s efficiency in generating profits. The company has a four-quarter average EPS surprise of nearly 45% and has beat earnings estimates in eight consecutive quarters dating back to March 2020. Additionally, GSL is currently a Zacks Rank #1 and has an overall VGM Score of an A.

Global Ship Lease has seen sustained demand, has supportive supply-side fundamentals for its target fleet segments, and executed a shareholder-friendly $10 million share buyback in Q3 of 2021. Furthermore, the company has seen its consensus estimate trend increase notably, sports an attractive P/E ratio, and has put together impressive quarterly earnings reports. These are all reasons I believe GSL would be a great portfolio addition.

Eagle Bulk Shipping Inc.

Eagle Bulk Shipping Inc. EGLE is a fully integrated shipowner-operator engaged in global transportation that focuses exclusively on the mid-size dry bulk vessel segment. It owns one of the largest fleets of Supramax/Ultramax ships globally.

The company has seen its current full-year earnings estimate rise 22% to $16.26 per share over the last 60 days, with next year’s EPS estimate increasing by a steep 76% to $15.13 per share. Analysts are upping the outlook for the next and following quarters as well, increasing estimates by 34% to $3.96 per share and 9% to $3.67 per share, respectively. Year-to-date, shares have been a hot commodity, increasing nearly 45% in value and benefitting from the estimate revisions.

Zacks Investment Research
Zacks Investment Research


Image Source: Zacks Investment Research

Like ZIM and GSL, the company’s forward earnings multiple of 4X is lower than the industry’s average and has helped it achieve a Style Score of A for Value. The ratio was as high as 5.2X and as low as 3X in 2022. Additionally, the metric is lower than its median of 4.4X over the last five years.

EGLE’s current TTM Return on Equity value of 34% is much higher than the industry’s average as well, providing investors with confidence that their money is in good hands. The company has an average EPS surprise of 1.3% over the last four quarters and currently boasts a Zacks Rank #1 (Strong Buy) with an overall VGM Score of an A.

Initially founded in 2005 with an initial fleet of 11 vessels, EGLE has evolved significantly into one of the world’s largest fleets and a top player in the shipping industry. The company has a laser-focused strategy, impressive management capabilities, an increasing earnings outlook, and has an enticing forward-earnings multiple. Based on these reasons, I believe that EGLE would be a great shipping company to add to your portfolio.


Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

Eagle Bulk Shipping Inc. (EGLE) : Free Stock Analysis Report

Global Ship Lease, Inc. (GSL) : Free Stock Analysis Report

ZIM Integrated Shipping Services Ltd. (ZIM) : Free Stock Analysis Report

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