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Tanker Stocks Continue Bucking the Market's Downtrend

·3 min read

Commodity shipping remains heavily impacted by the ongoing war in Ukraine. While many of the recent imbalances between supply and demand have somewhat subsided, the shipping industry is still booming. LNG carriers, which are tank ships designed for transporting liquefied natural gas (LNG), have seen shipping rates recently top $100,000 per day, and oil tanker rates remain elevated.

Normally, the colder weather that comes along with winter jacks up rates for tanker companies carrying LNG, crude oil, and refined products. But this year, rates have already increased to levels we would typically expect months from now. As activity levels pick up, this demand will remain in place and serve as a main driver of growth moving forward.

And as we saw earlier this week with the release of August’s CPI data, inflation is going to linger. That’s good news for shipping companies, as they’re able to charge higher rates and pass along the higher costs of doing business. Companies are paying a premium in order to transfer commodities, and the foreseeable future for the shipping industry looks bright.

The Zacks Transportation – Shipping industry is currently ranked in the top 19% out of over 250 industries. This group has widely outperformed the market with at 34% return year-to-date:

Zacks Investment Research
Zacks Investment Research


Image Source: Zacks Investment Research

In addition, this industry is relatively undervalued and shows above-average growth characteristics as we can see below:

Zacks Investment Research
Zacks Investment Research


Image Source: Zacks Investment Research

Historical research has illustrated that roughly half of a stock’s future price movement can be attributed to its industry group. Because it is ranked in the top half of all Zacks Ranked Industries, we expect this group to outperform over the next 3 to 6 months. By focusing on stocks within the top industries, we can provide a constant ‘tailwind’ to our investing success.

The industry also boasts a large number of highly ranked stocks per our Zacks Rank, serving as another confirmation signal that this group is a great place to be. Let’s take a look at a Zacks Rank #1 (Strong Buy) stock that is outperforming the market and recently hit new 52-week highs, all while the major averages hover in deep correction.

Zacks Investment Research
Zacks Investment Research


Image Source: Zacks Investment Research

Scorpio Tankers Inc. (STNG)

Scorpio Tankers is engaged in the seaborne transportation of refined petroleum products via the global shipping markets. STNG boasts a remarkable fleet consisting of more than 120 chartered-in tankers. Its vessels carry petroleum products and crude oil for integrated oil companies, oil traders, and other customers. Scorpio Tankers was incorporated in 2009 and is headquartered in Monaco.

STNG has surpassed earnings estimates in three of the past four quarters, delivering a trailing four-quarter average earnings surprise of 14.7%. The stock has responded well and has already advanced nearly 260% this year. Despite the impressive run, shares remain undervalued at just a 5.01 forward P/E.

Analysts have increased their EPS estimates across the board. For the full year, estimates have been revised upward by 97.36% in the past 60 days. The Zacks Consensus Estimate is now $8.98 per share, translating to potential growth of 315.35% relative to the same quarter last year.

Zacks Investment Research
Zacks Investment Research


Image Source: Zacks Investment Research

Make sure to keep an eye on the shipping industry as we come up on the fourth quarter.


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Zacks Investment Research