Strength Seen in Frontline (FRO): Can Its 7.7% Jump Turn into More Strength?
Frontline (FRO) shares ended the last trading session 7.7% higher at $18.69. The jump came on an impressive volume with a higher-than-average number of shares changing hands in the session. This compares to the stock's 5.5% gain over the past four weeks.
Frontline had decided in January to scrap a $4.2 billion planned merger between Frontline and fellow shipping company Euronav. As a result, Euronav initiated an arbitration action against FRO. On Oct 5, one of Euronav's shareholders Compagnie Maritime Belge offered to acquire Frontline's 26.12% stake in Euronav for $18.43 per share, which will be followed by a mandatory public offer at the same price. As part of the deal, FRO will have to buy 24 very large crude carriers from Euronav's fleet for $2.35 billion. In the event of this transaction materializing, the arbitration action against FRO would end. This update was responsible for the spike in FRO's shares on Oct 5.
This shipping company is expected to post quarterly earnings of $0.46 per share in its upcoming report, which represents a year-over-year change of +24.3%. Revenues are expected to be $250.3 million, up 19.9% from the year-ago quarter.
While earnings and revenue growth expectations are important in evaluating the potential strength in a stock, empirical research shows a strong correlation between trends in earnings estimate revisions and near-term stock price movements.
For Frontline, the consensus EPS estimate for the quarter has been revised 26.1% lower over the last 30 days to the current level. And a negative trend in earnings estimate revisions doesn't usually translate into price appreciation. So, make sure to keep an eye on FRO going forward to see if this recent jump can turn into more strength down the road.
The stock currently carries a Zacks Rank #3 (Hold). You can see the complete list of today's Zacks Rank #1 (Strong Buy) stocks here >>>>
Frontline belongs to the Zacks Transportation - Shipping industry. Another stock from the same industry, Diana Shipping (DSX), closed the last trading session 2.4% higher at $3.40. Over the past month, DSX has returned -6.7%.
For Diana Shipping , the consensus EPS estimate for the upcoming report has remained unchanged over the past month at $0.07. This represents a change of -81.1% from what the company reported a year ago. Diana Shipping currently has a Zacks Rank of #3 (Hold).
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