The shipping industry is expected to grow due to strong demand from e-commerce growth, increasing global trade, and advancements in supply chain technology. Given the industry’s tailwinds, investors could consider buying fundamentally sound shipping stocks, ZIM Integrated Shipping Services Ltd. (ZIM), Matson, Inc. (MATX), and Hafnia Limited (HAFN).
Increasing global trade volume is notably driving market growth, with the advantages of cargo shipping being pivotal in facilitating economic exchanges across borders. Economic growth and international trade agreements positively influence the volume of goods transported via cargo shipping. The cargo shipping market is forecast to grow at a CAGR of 5.1% between 2023 and 2028.
Additionally, Artificial Intelligence (AI) is also playing a transformative role in the shipping and logistics market, which is expected to reach $12.87 billion by 2026, according to the Gitnux Market Data Report 2024. The rise in AI adoption highlights the industry's drive toward more innovative and efficient ways of operating.
Considering these favorable trends, let’s take a closer look at the fundamentals of the three Shipping picks, starting with number #3.
Stock #3: ZIM Integrated Shipping Services Ltd. (ZIM)
Based in Haifa, Israel, ZIM operates a global fleet and network of shipping lines, providing comprehensive cargo transportation services across major trade routes. Its services include multi-modal solutions, cargo handling, tariff management, and schedule information.
On September 9, 2024, ZIM announced a new long-term operational cooperation with Mediterranean Shipping Company (MSC) for transpacific trade, set to launch six services from Asia to the U.S. East Coast and Gulf starting February 2025.
This partnership aims to enhance service quality and operational efficiency, utilizing larger, eco-friendly vessels as part of ZIM’s fleet renewal program.
ZIM’s trailing-12-month levered FCF margin and cash per share of 17.48% and $7.39 are 168.5% and 256.5% higher than the industry averages of 7.19% and $2.07, respectively.
For the fiscal 2024 second quarter that ended June 30, 2024, ZIM’s total revenues increased 47.6% year-over-year to $1.93 billion. Its operating income stood at $468 million, compared to a loss of $168 million in the previous year’s quarter. Also, the company’s adjusted EBITDA rose 187.5% from the year-ago value to $766 million.
Moreover, ZIM’s net income and EPS came in at $373 million and $3.08, compared to a net loss and loss per share of $213 million and $1.79 in the previous year’s quarter.
Analysts expect ZIM’s revenue for the fiscal third quarter ended September 2024 to increase 89.3% year-over-year to $2.41 billion. In addition, the company’s EPS for the same quarter is expected to come in at $6.54.
Shares of ZIM have surged 77.4% over the past six months and 97% year-to-date to close the last trading session at $19.44.
ZIM’s POWR Ratings reflect its robust outlook. The stock has an overall rating of B, which translates 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.
ZIM has a B grade for Growth, Value, and Quality. The stock is ranked #14 out of 37 stocks in the A-rated Shipping industry.
To see the other ratings of ZIM for Sentiment, Momentum, and Stability, click here.
Stock #2: Matson, Inc. (MATX)
Headquartered in Honolulu, Hawaii, MATX and its subsidiaries engage in providing ocean transportation and logistics services. It operates through two segments: Ocean Transportation and Logistics.
In terms of the trailing-12-month net income margin, MATX’s 10.41% is 68.6% higher than the 6.17% industry average. Its 7.76% trailing-12-month Capex / Sales is 167.6% higher than the 2.90% industry average. Also, its 12.78% trailing-12-month levered FCF margin is 96.2% higher than the 6.51% industry average.
MATX’s total operating revenues for the second quarter ended June 30, 2024, increased 10.1% year-over-year to $847.40 million. The company’s operating income rose 28.9% over the prior-year quarter to $124.60 million. In addition, its net income and EPS rose 40.1% and 46.5% from the year-ago values to $113.20 million and $3.31, respectively.
For the quarter ended September 30, 2024, MATX’s EPS and revenue are expected to increase 37.2% and 16.9% year-over-year to $4.66 and 967.68 million, respectively. It surpassed Street EPS estimates in each of the trailing four quarters. MATX’s stock has gained 52.7% over the past year to close the trading session at $136.29.
MATX’s strong fundamentals are reflected in its POWR Ratings. It has an overall rating of B, translating to a Buy in our proprietary rating system.
It has a B grade for Quality. It is ranked #8 in the same industry. To access additional grades of MATX for Growth, Stability, Momentum, Value, and Sentiment ratings, click here.
Stock #1: Hafnia Limited (HAFN)
HAFN owns and operates oil product tankers in Bermuda. It operates through Long Range II, Long Range I, Medium Range (MR), Handy size, and Specialized segments.
HAFN’s trailing-12-month EBIT margin and net income margin of 28.39% and 27.01% are 38.3% and 123.5% higher than the industry averages of 20.53% and 12.08%, respectively.
HAFN’s total revenue for the fiscal second quarter that ended June 30, 2024, increased 19.5% year-over-year to $417.36 million. The company’s profit for the financial period increased 21.5% year-over-year to $259.20 million. Also, its earnings per share attributable to the equity holders of the company grew 21.4% year-over-year to $0.51.
The consensus revenue of $377.93 million for the third quarter ended September 2024 represents a 16.2% increase year-over-year. Its EPS is expected to be $0.35 for the same quarter.
Over the past month, HAFN’s stock has gained 5.6% to close the last trading session at $7.38.
HAFN’s POWR Ratings reflect its solid prospects. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system.
HAFN has a B grade for Quality. Within the same industry, it is ranked #7.
To see HAFN’s additional ratings for Stability, Growth, Momentum, Value, and Sentiment, click here.
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MATX shares were trading at $135.45 per share on Wednesday afternoon, down $0.84 (-0.62%). Year-to-date, MATX has gained 24.61%, versus a 22.42% 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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