10.00 +0.08 (0.81%)
Pre-Market: 8:22AM EDT
|Bid||9.97 x 1800|
|Ask||10.00 x 2200|
|Day's Range||9.90 - 10.22|
|52 Week Range||7.21 - 13.21|
|Beta (5Y Monthly)||0.81|
|PE Ratio (TTM)||N/A|
|Forward Dividend & Yield||1.16 (11.54%)|
|Ex-Dividend Date||Jun 05, 2020|
|1y Target Est||15.64|
In this article we will take a look at whether hedge funds think Euronav NV (NYSE:EURN) is a good investment right now. We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, unconventional data sources, expert networks, and get tips from […]
Here at Zacks, our focus is on the proven Zacks Rank system, which emphasizes earnings estimates and estimate revisions to find great stocks. Nevertheless, we are always paying attention to the latest value, growth, and momentum trends to underscore strong picks.
COVID-19 is a game-changer for every link in the transport chain, from cargo ships to trucks, trains and air freighters. Amit Mehrotra, the managing director of air freight, surface transportation and shipping at Deutsche Bank (NYSE: DB), is one of the rare professionals who covers the entire gamut.During a lengthy interview with FreightWaves on Monday, Mehrotra opined on coronavirus consequences for the world's supply chains and explained why he believes some transport companies will see stock valuations "skyrocket" in the crisis aftermath. The following is an edited version of that conversation:Container imports and globalizationFreightWaves: There have been massive swings in U.S. imports over a short period. What's your view on current volumes? What's still coming in and what's not?Mehrotra: "We're bracing for a pretty significant leg down in container imports to the U.S. We think there could be a 20%-plus decline in imports through September. What we've seen so far is a supply-chain-driven decline in volumes. I think what's coming is a second wave that is an organic-demand-driven decline in volumes."We haven't really seen the fallout yet from the financial turmoil a lot of people are finding themselves in. The bottom line is we're going to have 20%, 25%, 30% unemployment in this country. What's coming is the real ‘air pocket' in demand. It's not going to zero — people are still going to need essential items: food, beverages, personal care, dry goods. But they won't need that sweater and that new pair of shoes, and a significant chunk of the economy is retail apparel."How important are U.S. container imports to land-transport volumes, whether trucking or intermodal rail?"It's very important for land transport. It's undeniable. There is more of a lag with trucking than with intermodal; with trucking loads, there is a 65% correlation [with port imports] on a one-month lag basis. Every trucking executive will tell you that port imports are a very big absorber of capacity."Do you think this crisis will cause global supply chains to diversify away from China, or for there to be some deglobalization and nearshoring — or both?"Both. There are going to be huge implications for how freight moves globally. I was talking to the head of supply chain at one of the world's largest retailers, which serves 100 million households in the U.S. — 70% of U.S. households. And he said that 80% of their supply chain still comes from China and they don't believe it makes sense anymore."Diversification of supply chains away from China to countries like India and Vietnam will very obviously be a long-term implication of this, but I also think there will be more nearshoring. I cover Kansas City Southern (NYSE: KSU), which has a lot of exposure to Mexico, and they are seeing this trend. We were already seeing it [before coronavirus] as wage inflation rose in China."Transport stock upside ahead?How do you think the coronavirus is going to affect transport stocks in the medium term? What are the bellwethers you're looking at with regards to the shape of any recovery curve?"I want to say this very clearly: My personal belief is that I hope we find a vaccine and everybody is healthy and this is over as soon as possible. But purely in the context of assessing stocks, I don't really care about the shape of the recovery. "I think the slope of the recovery is irrelevant as long as it's positive. If it turns out that the slope of the curve is negative, equity values in the near term have a big leg to go down, but I think the bottom is in."I was probably the most bullish transportation analyst out there last year and obviously the coronavirus derailed that to some extent, but the underlying premise of my bullish view is wholly intact. My view is that what's going to happen over the next 12-18 months will be very positive for equity valuations. "What I believe you're going to have for equity valuations is a perfect storm: one, very low interest rates; two, low capital intensity because everybody's cutting CAPEX; and three, accelerating growth expectations. I know this could be considered a perverse argument but for better or worse, 2021 growth looks better today than it did three months ago, because 2020 is down in absolute terms [due to the coronavirus]."We're talking about a 20%, 25%, 30% negative GDP print in the second quarter. It's completely unprecedented. Anytime you have such a disproportionate decline in GDP, it's typically followed by a significant release in pent-up demand."As an example, Europe is maybe one month ahead of the U.S. in terms of coronavirus impact. XPO Logistics (NYSE: XPO) has said that in Europe, its volumes in the last week of April were 23% above volumes in the first week of April. If we can get that type of sequential improvement, transport equities are going to skyrocket, not necessarily because earnings expectations are going up but because people are going to capitalize earnings expectations in the midterm at much higher multiples."In general, equity values are much more levered to the multiples you place on earnings than the actual earnings themselves. If you earn $10 per share and grow earnings to $11, then all else equal, your stock price goes up 10%. But if your multiple goes from 10 times to 12 times, you see a disproportionate uplift on the entirety of your earnings."Multiples are a function of forward growth. If there is growth on the horizon, people are always willing to capitalize today's earnings at a higher multiple because of that dynamic. That's the way cyclical investing works. If you are earning $10 today and that represents a cyclical low and you expect to earn $13 at some point in the future, whether it's next year or the year after, people are willing to capitalize that $10 at a higher multiple."The opposite is also true. If you get that $13 tomorrow and people see $10 on the horizon, they're probably going to de-rate that stock [give it a lower multiple]. Solely from a financial stock analyst point of view, you don't actually want there to be a V-shaped recovery because it risks de-rating the stocks more quickly than you otherwise would. My hope is that we have a recovery and it's a slow and steady recovery so that the cycle can be more elongated."Higher risk premium for transport playersAnother issue for transport stocks, regardless of mode, involves risk. The risk of the coronavirus was not factored into the equation previously due to a failure of imagination, but we can't "unremember" it now, so it will be factored in going forward."It's such a great point and I've been thinking about this a lot. I don't think a lot of people talk about the price of risk."When you think about the valuation of a company, the cost of capital is extremely important as a reference point. When we talk about a company creating value over time, we are talking about generating returns above the cost of capital."One of the biggest components of calculating your weighted average cost of capital [WACC] is the price of risk — your equity risk premium. I think it's totally logical and fair to say that the equity risk premium has structurally risen in the post-pandemic world. That's very clear."But if your risk premium goes up 100 basis points because of coronavirus and at the same time your interest rates go down 100 basis points, that doesn't impact your cost of capital."Also, when you look at the levers that drive returns above the weighted average cost of capital, it's obviously your margins, and the CAPEX intensity dictates how much of your margins is dropped down to free cash flow. Ultimately all you're doing is discounting your free cash flow. When you look at that, you find the biggest lever to that number is growth and as I mentioned before, one of the impacts of the coronavirus is that growth expectations for next year have actually improved."What you're saying is that the outbreak will cause the equity risk premium to rise but the effect on WACC would be offset by lower interest rates and at the same time, growth prospects would increase off a lower base, so net-net, a positive?"Correct."Ocean shipping stock valuationsI'd like to bring this theoretical discussion over to concrete examples. Let's talk about ocean shipping stocks, starting with tanker stocks, because there's a lot of talk now that they're not being properly priced in the market in terms of the fundamental value of the tanker companies. In fact, you recently wrote an open letter to the management of Euronav(NYSE: EURN) addressing the stock-valuation issue."The letter I wrote definitely came from a place of some frustration, but what I was really trying to get across was the question of: Why should a shipping company be public? The answer is that the public equity markets can be a very efficient avenue for capital if the value of your stock is above net asset value [NAV; the market-adjusted value of the fleet and other assets minus debt and other liabilities]. If your stock is above your NAV, that provides you a perpetual capital base to fund accretive growth. I believe the entire 100% reason for a shipping company to be public is to manage the business so that one day its stock is valued above NAV."But what if you're a well-managed company with an incredibly responsible capital allocation and you've done everything right, like Euronav has, and the market is still treating your stock like crap? What benefit are you getting from being public? It costs $5 million to $10 million [a year] for these companies to be public. That's money going right out the door."So, you pay out dividends and what you're trying to do with dividends is decouple the stock price from NAV and value the company based on the dividend. There's no other reason to give dividends. But what if that doesn't work?"I believe Plan B is to take your debt down to zero, which brings your breakeven way down. With no debt, your breakeven is OPEX, so [for a company like Euronav] $8,000-$9,000 a day [per very large crude carrier], which means you'd be able to pay dividends on a more sustainable basis."And after all that, if a company like Euronav still doesn't get credit, I think it should just buy back the whole thing and go home [i.e., privatize]."But this all goes back to the question of whether these tanker stocks are working properly right now. Why are stocks like Euronav's trading where they are when these tanker companies are churning out piles of cash?"It's a fair question. First, I'd say we haven't really seen all the money yet. You saw some of it in the first-quarter results, but we still really haven't seen the deleveraging of the balance sheets we will over the next three to four months."I also feel investors are understandably saying that these rates are unsustainable because there's a lot of [oil] inventory being stocked and we're going to see the biggest destocking cycle of our lifetimes, during which tanker demand will go toward zero, although it won't go all the way to zero because you'll still have to move some oil."But I do think the magnitudes of the cash flows have been completely underappreciated. These companies are trading at a 20-30% discount to NAV, but that NAV is reflecting a capital structure that's probably understated by $400 million-$600 million. Because that debt is going to be paid down in the second and third quarters, these companies are not really trading at a 20-30% discount to NAV, they're trading at a 40-50% discount to NAV when you look at it from a pro forma perspective. I do think there is a real dislocation here."Looking at the overall field of U.S.-listed ocean shipping companies, there are so many of them now with extremely low valuations versus NAV, many lower than Euronav's, and with market caps that are minuscule, in most cases much lower than Euronav's."It doesn't do the industry any good [to have so many micro-cap companies listed] because all it does is fragment the capital base."We made the decision to stop covering any company with a market cap under $500 million that doesn't trade more than $5-10 million in volume per day. It's no coincidence that every stock I cover in shipping is the largest company within its segment, whether it's Euronav (in crude tankers), Scorpio Tankers (NYSE: STNG) (in product tankers) or Star Bulk (NYSE: SBLK) (in dry bulk)."I'm going to cover each vertical and the biggest guy in each vertical. I'm going to go with the one I think has a sustainable model, and that can evolve from being a company into being a platform to consolidate the sector."But consolidation — and the idea that the public ocean-shipping arena needs to evolve into one with fewer, larger players with much higher market caps — has been talked about for years. It hasn't happened yet. Do you really think it's possible to finally turn this around post-coronavirus and for public markets to become more consolidated?"To be quite honest, I would say the odds are against it. But I still think it is possible — I am still hopeful." Click for more FreightWaves/American Shipper articles by Greg Miller See more from Benzinga * Toilet Paper Rolls And Supply Chain Roles * Uber Freight Head: API Requests For Market Pricing Up 150% * Wallbox, A Company Founded By Former Tesla Employees, Closes M Seed Round(C) 2020 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
Today we'll evaluate Euronav NV (EBR:EURN) to determine whether it could have potential as an investment idea. In...
We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy […]
Jefferies SVP of Equity Research Randy Giveans joins Yahoo Finance’s Seana Smith and Julie La Roche on The Ticker to discuss the outlook on tanker companies, after Saudi Aramco unveiled new plans to raise its oil production capacity to 13 million barrels per day.
It’s cliché in the West that the Chinese written pictogram for ‘crisis’ can also be read as ‘opportunity’ or ‘danger,’ but like many clichés, it comes from a seed of truth. Any crisis, be it political or medical or economic – or some combination of them all, as in the COVID-19 epidemic – brings with it heightened risks and rewards. British hedge fund manager Crispin Odey gave us a lesson that just recently, when his fund posted a 5% gain in the wake of coronavirus’s hit on the world’s stock exchanges.Odey saw those gains, in his European fund, after making moves against electric car maker Tesla and against US shale oil stocks. Both have dropped on fears of coronavirus impact, but while Tesla shares are likely to stabilize and move back up, oil companies will continue to feel the hurt. Crude prices are down sharply, as the viral impact is disrupting travel plans and trade patterns – and demand for fuel.Speaking of his quick move to short what had seemed to be strong positions, Odey said, “We went into coronavirus with the market incredibly bullish, everyone was long. I’m more cautious than most people.”Odey’s caution has served him well in his career. In 2016, he was a well-known supporter of the ‘Leave’ vote in the initial Brexit debates – but when it came time to put up, he made a profit of 220 million pounds predicting that markets would collapse in the event that ‘Leave’ won the vote. Odey has long been known as a bearish investor, a reputation that peaked, perhaps, in 2008, when his short position on major banking institutions saw him profit handsomely despite that year’s financial crisis.So, when a hedge fund manager as famously cautious as Odey started snapping up shares, it’s time to take notice. His fund, Odey Asset Management, listed three notable moves in the fourth-quarter. We’ve used the TipRanks Stock Screener tool to sort out some commonalities among them: all three are mid- to large-cap stocks, with ‘Buy’ ratings from Wall Street and at least 10% upside potential – in one case, nearly 120%! Of the three, only one pays a dividend, but that one yields a strong 6.6%. Let’s investigate the details, and find out what else drew Odey to these calls.Euronav NV (EURN)The first company on our list is a shipping company. Antwerp-based Euronav is the world’s largest crude oil tanker platform, whose operations include both ocean-going tanker transport and FSO (floating, storage and offloading) services.Odey's firm has increased its holding of Euronav by 305% in the past quarter, picking up over 2.6 million shares. Odey Management holds 3.552 million shares in the company, worth more than $30 million.Euronav’s Q4 2019 earnings report showed clear gains, both for the quarter and the full year. For the quarter, revenue reached $355 million, with a profit of $160 million. This was a 50% revenue gain year-over-year, and nearly unchartable gain from Q4 2018’s profit of just $279,000. The Q4 numbers changed a full-year net loss into a net gain, and Euronav posted FY19 revenues of $932.3 million with a net profit of $118.8 million. The full-year profit is complete turnaround from FY18’s net loss of $110 million.Evercore analyst Jonathan Chappell writes of Euronav’s current position, “…although fear is at a fever pitch presently, as it relates to slumping oil demand associated with the onset of coronavirus, the tanker supply and demand outlook remains robust, and as the owner of an industry-leading fleet and a fortress balance sheet, EURN is poised to continue to provide enhanced EPS … growth over the coming quarters…”Chappell puts a $21 price target on the stock to support his Buy rating, indicating his confidence with a 130% upside potential. (To watch Chappell’s track record, click here)Randy Giveans, with Jefferies, is also bullish, and gives this stock a Buy rating with a $14 price target. Supporting his stance, Giveans writes, “Following the short-term oil demand shock due to coronavirus, we believe the tanker market will strengthen during 2020, while fleet growth continues to slow in the coming quarters.” His price target implies an upside of 67%. (To watch Giveans’ track record, click here)Euronav holds a unanimous Strong Buy analyst consensus rating, based on 4 Buy and 1 Hold ratings. The stock is selling for a discounted $9.12, and the average price target of $16.82 suggests a whopping 84% upside growth potential over the coming year. (See Euronav stock analysis on TipRanks)UBS Group AG (UBS)Next up is a staple of the international banking scene, Swiss-based UBS. This multi-billion dollar banking firm is the largest of the famous Swiss banks, and holds an important position in the global financial scene. UBS has over 3.34 trillion Swiss franc (CHF) in assets under management, equivalent to $3.61 trillion in US currency.UBS is a new position for Odey, whose firm bought 1.447 million shares. The holding is worth $15.145 million at current share prices – or 14.056 million CHF.Of the stocks in this list, USB is the only one that pays out a high dividend – and at 6.6%, it is well over 6x the average of S&P-listed companies. The payout, 69 cents per share, is distributed annually and has been raised modestly over the last four years.Last month, UBS announced that, as of November 1 this year, ING head Ralph Hamers will take over as CEO. The move is seen as bold – Hamers oversaw ING’s strong shift to digital innovation, and banking sector analysts are keen to see what he will bring to UBS.Kian Abouhossein, 4-star analyst with JPMorgan, is upbeat about UBS’ current situation, writing, “Ralph Hamers is amongst the more highly regarded CEOs in European Banking... In our view, UBS has an excellent franchise and mix of businesses with 60% of Net Profit coming from Wealth Management; it is all about creating positive operating leverage in the group which has been lacking in the last few years and a fresh pair of eyes would help in this regard.”Abouhossein gives this stock a CHF$15.00 price target ($16.14), implying a robust 62% upside, to support his Buy rating. (To watch Abouhossein’s track record, click here)Berenberg analyst Eoin Mullany is also bullish on UBS, as indicated by his CHF$15.00 price target ($16.14) and Buy rating.Commenting on UBS, Mullany says, “Having reset its profitability and capital return targets, it is time for UBS to deliver. With consensus already at the bottom end of its new profitability targets, expectations are low, but with 2020 having started well, we are confident that UBS can beat consensus expectations.” His target indicates that he expects a 54% upside here. (To watch Mullany’s track record, click here)All in all, UBS holds a Moderate Buy analyst consensus rating, based on a mix of reviews: 4 Buys, 2 Holds, and 2 Sells. The stock is selling for $9.27 (8.61 CHF), and the average price target of $13.56 (12.60 CHF) suggests an upside potential of 46%. (See UBS stock analysis on TipRanks)Charter Communications (CHTR)Last up is Charter Communications, a $100 billion player in the US telecom sector. Using the brand name Spectrum, Charter offers cable services to more than 26 million customers in 41 states. After industry leader Comcast, Charter is the second-largest cable provider in the US. Charter also offers telephone services, and is the fifth-largest landline provider.Clearly, Odey is impressed by Charter’s sustained upward path; he bought 26,706 shares of the company in the past quarter. This brought his full holding of CHTR to 51,008 shares, which are currently worth an impressive $25.336 million. Odey Management has held a position in CHTR since the third quarter of 2016.The company’s Q4 2019 numbers tell the story, as far as numbers can. Quarterly earnings came in at $3.37 per share, beating the forecast by 34% and growing an impressive 161% year-over-year. Quarterly revenues, at $11.76 billion, showed smaller gains.Evercore ISI’s 4-star analyst Vijay Jayant puts a bullish $600 price target on CHTR shares. This implies an upside of 16%, and supports his Buy rating.In his recent research note, Jayant wrote, “Charter’s 4Q19 results and management’s 2020 commentary support our bullish thesis as we move into 2020. With tailwinds from continued strong broadband subscriber performance, the full year impact of the 4Q19 price increase, political advertising, and continued operating leverage, we expect 8-9% EBITDA growth in 2020E. Flattish capex and improved working capital translates this into 15% OpFCF growth, and the company’s aggressive capital returns turn that into 21% expected FCF/share growth..” (To watch Jayant’s track record, click here)Overall, Charter Communications gets a Moderate Buy rating from the analyst consensus, based on a near-even split of 9 Buys, 8 Holds, and a single Sell. The stock sells for $470.28, while the average price target of $549.06 indicates a general confidence in 10% upside growth in the next 12 months. (See Charter stock analysis at TipRanks)
Euronav NV (EBR:EURN) shareholders have seen the share price descend 13% over the month. But looking back over the...
The coronavirus outbreak centered in China continues to worsen. Over 7,800 cases have been reported — already exceeding the 2002-03 SARS outbreak — and over 170 people have died. F allout for crude-tanker ...
HIGHLIGHTS Strong tanker dynamics - highest quarterly rate performance in ten yearsCrude tanker market fundamentals remain constructive for 2020Q1 trading VLCC rates so far USD.
Today we'll take a closer look at Euronav NV (EBR:EURN) from a dividend investor's perspective. Owning a strong...
In 2020, the shipping industry is likely to witness rising freight rates due to limited tonnage supply. Favorable developments on the trade front are other positives.
Faced with imminent new global marine pollution rules, shipping companies and insurers are puzzling over the risks. To reduce emissions of toxic sulphur that cause premature deaths, shipowners who have long relied on the dirtiest residues of oil extraction will have to either switch to low-sulphur fuel or install exhaust gas cleaning systems from Jan. 1. Neither option has been fully tested for long, and some problems have already been reported, both with the more expensive new fuels and with devices known as scrubbers which extract the sulphur on board.
Hedge Funds and other institutional investors have just completed filing their 13Fs with the Securities and Exchange Commission, revealing their equity portfolios as of the end of June. At Insider Monkey, we follow nearly 750 active hedge funds and notable investors and by analyzing their 13F filings, we can determine the stocks that they are […]