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Frontline 4Q Sales Sink 48% On Weak Oil Tanker Demand

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Frontline suffered a 48.3% decline in its total operating revenues during the fourth quarter as the oil tanker shipping company grappled with lower tanker demand. However, 4Q total operating revenues, which came in $174.9 million still surpassed analysts’ expectations of $108.9 million. Shares fell 1% in extended market trading after gaining 2.4% at the close on Friday.

Frontline (FRO) reported an adjusted loss of $0.10 per share for the quarter, which was larger than analysts’ expectations of a loss of a penny. Moreover, the bottom-line result compared with the year-ago quarter’s adjusted earnings of $0.54 per share.

The company reported that the spot Time Charter Equivalent (TCE) rates for its VLCCs, LR2 tankers and Suezmax tankers were $17,200, $12,500, and $9,800 per day, respectively, in 4Q. (See Frontline stock analysis on TipRanks).

Following the earnings release, Evercore ISI analyst Jonathan Chappell upgraded the stock to Hold from Sell and raised the price target to $7 (5.2% downside potential) from $5.50. In a note to investors, Chappell commented that he believes that the company’s leveraged balance sheet is no longer a risk and therefore he sees meaningful upside on the rebound in demand.

Overall, the consensus among analysts is a Moderate Buy based on 3 Buys and 2 Holds. The average analyst price target of $8.53 implies upside potential of about 15.6% to current levels. That's after shares already gained about 19% this year.

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