The rise in the number of cargo shipping is being witnessed around the world due to trade liberalization and global economic growth. Various types of storage, loading, unloading, and securing require different types of ships for transportation.
Given this backdrop, it could be wise to consider investing in fundamentally strong shipping stocks, Teekay Corporation Ltd. (TK), ZIM Integrated Shipping Services Ltd. (ZIM), and Matson, Inc. (MATX).
The rising demand for cargo vessels such as container ships, bulk carriers, and others due to the growth in sea freight activity is driving the cargo shipping market. Factors such as the increasing demand for cargo transportation through ships and the surge in trade-related agreements supplement the growth of the cargo shipping market.
Additionally, the shift towards sustainable shipping practices, driven by regulatory pressures and corporate social responsibility, encourages investment in modern, eco-friendly vessels. Therefore, the global market for dry bulk shipping is projected to grow at a CAGR of 2.5% by 2030.
Given these favorable industry trends, let’s look at the fundamentals of Shipping stocks, beginning with the third choice.
Stock #3: Teekay Corporation Ltd. (TK)
Based in Hamilton, Bermuda, TK engages in crude oil and other marine transportation services worldwide. The company owns and operates crude oil and refined product tankers. It also provides ship-to-ship support services, tanker commercial management operation services, and operational and maintenance marine services.
In terms of the trailing-12-month EBIT margin, TK’s 29.77% is 50.1% higher than the 19.83% industry average. Likewise, its 26.99% trailing-12-month levered FCF margin is 296.5% higher than the 6.81% industry average.
For the third quarter of 2024, which ended on September 30, TK’s revenues were reported to be $272.62 million, while the income from vessel operations stood at $52.19 million. Its adjusted net income attributable was valued at $21.10 million and $0.23 per share.
The stock has surged 3.9% year-to-date, closing the last trading session at $7.20.
TK’s POWR Ratings reflect its promising outlook. The stock has an overall rating of B, which equates to a Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
TK has an A grade for Quality and Value. It is ranked #10 out of 35 stocks in the Shipping industry. Click here to see the additional ratings for TK (Growth, Momentum, Stability, and Sentiment).
Stock #2: ZIM Integrated Shipping Services Ltd. (ZIM)
ZIM provides container shipping and related services in Israel and internationally. It provides door-to-door and port-to-port transportation services for various types of customers, including end-users, consolidators, and freight forwarders.
For the third quarter that ended September 30, 2024, ZIM’s income from voyages and related services increased 117.2% year-over-year to $2.77 billion. The company’s adjusted EBITDA rose 625.6% from the prior year’s quarter to $1.53 billion. Its net income and EPS came in at $1.13 billion and $9.34, compared to a net loss of $2.27 billion and $18.90 during the prior year’s quarter.
Additionally, the company’s free cash flow rose 343.3% from the year-ago value to $1.45 billion.
Street expects ZIM’s revenue for the fiscal fourth quarter (ended December 2024) to increase 65.5% year-over-year to $1.99 billion.
Shares of ZIM have gained 74.9% over the past year to close the last trading session at $20.79.
ZIM’s bright prospects are reflected in its POWR Ratings. The stock has an overall rating of B, equating to a Buy in our proprietary rating system.
ZIM has an A grade for Value and Quality. It is ranked #8 out of 35 stocks in the Shipping industry.
In addition to the POWR Ratings we’ve stated above, we also have ZIM ratings for Quality and Value and a B for Growth. Get all ZIM ratings for Momentum and Stability here.
Stock #1: Matson, Inc. (MATX)
MATX engages in the provision of ocean transportation and logistics services. It operates through two segments, Ocean Transportation and Logistics.
In terms of the trailing-12-month levered FCF margin, MATX’s 14.56% is 118.8% higher than the 6.65% industry average. Similarly, the stock’s 14.30% trailing-12-month EBIT margin is 38.2% higher than the 10.35% industry average.
For the third quarter that ended September 30, 2023, MATX’s total operating revenue increased 16.3% year-over-year to $962 million. Its operating income rose 83.4% from the prior year’s quarter to $242.30 million. Also, the company’s net income and EPS totaled $199.10 million and $5.89, up 66.1% and 73.2% year-over-year, respectively.
Analysts expect MATX’s revenue for the fourth quarter (ended December 2024) to increase 8% year-over-year to $851.78 million. The company’s EPS for the same period is expected to grow 79.8% year-over-year to $3.20. Moreover, the company topped the consensus EPS estimates in all of the trailing four quarters.
Over the past six months, the stock has surged 10%, closing the last trading session at $142.07.
MATX’s POWR Ratings reflect its bright outlook. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system.
MATX has a B grade for Growth and Quality. It is ranked #4 in the same industry. Click here to see the additional ratings for MATX (Value, Sentiment, Momentum, and Stability).
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MATX shares were trading at $141.93 per share on Wednesday afternoon, down $0.14 (-0.10%). Year-to-date, MATX has gained 5.52%, versus a 3.02% rise in the benchmark S&P 500 index during the same period.
About the Author: Nidhi Agarwal
Nidhi is passionate about the capital market and wealth management, which led her to pursue a career as an investment analyst. She holds a bachelor's degree in finance and marketing and is pursuing the CFA program. Her fundamental approach to analyzing stocks helps investors identify the best investment opportunities.
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