The shipping industry plays a critical role in the global economy, serving as the backbone of international trade and facilitating the movement of goods across borders. Despite challenges such as high inflation and escalating fuel costs, the industry has demonstrated resilience due to the relatively inelastic demand for shipping services.
Thus, it could be wise for investors to buy fundamentally sound shipping stocks with strong momentum, Teekay Corporation (TK), Overseas Shipholding Group, Inc. (OSG), and StealthGas Inc. (GASS).
Owing to the increasing maritime shipping activities driven by the expansion of trade agreements among nations, the global market for shipping containers is projected to reach $5.67 billion by 2028, exhibiting a CAGR of 4.6%. The market is witnessing robust growth as countries foster stronger economic ties, leading to a greater demand for shipping containers.
Moreover, in 2022, the global market for dry bulk shipping was valued at $337.16 billion, and it is projected to grow at a CAGR of 5.4%, reaching $461.55 billion by 2028.
The shipping industry's resilience is demonstrated during periods of economic volatility and crises. Despite challenges, such as geopolitical uncertainties, natural disasters, or global pandemics, shipping continues to adapt and find alternative routes and solutions to keep the flow of goods moving.
With all these factors in mind, let us look at the fundamentals of the featured stocks in detail.
Teekay Corporation (TK)
Headquartered in Hamilton, Bermuda, TK provides international crude oil and other marine transportation services. The company owns and operates crude oil and refined product tankers. It also provides ship-to-ship support services, tanker commercial management, technical management operation services, etc.
On June 9, TK announced that it repurchased 4.40 million of its common shares for $25 million as part of its ongoing share repurchase program. The average price per share in this transaction was $5.67. Since August 2022, TK has repurchased a total of 10.87 million common shares, accounting for 10.7% of the outstanding common shares before the initial repurchase plan was announced.
The stock’s trailing-12-month EBIT and levered FCF margins of 30.40% and 17.57% are 19% and 203.6% higher than the 25.54% and 5.79% industry averages, respectively. Likewise, its trailing-12-month ROTC of 14.11% is 25.8% higher than the industry average of 11.21%.
TK’s revenues increased 96.8% year-over-year to $418.70 million in the first quarter (ended March 31, 2023), while its income from operations stood at $179.84 million. The company’s attributable net income amounted to $48.76 million versus a net loss of $40.76 million in the same period last year. Also, its EPS came in at $0.48 for the same period.
Its EPS is expected to increase by 12% per annum in the next five years. In addition, its tang book value has grown at a 32.9% CAGR over the past three years.
Over the past year, the stock has gained 90.2% to close the last trading session at $5.99. It is trading higher than its 50-day and 200-day moving averages of $5.80 and $4.87, respectively, indicating an uptrend.
TK’s POWR Ratings reflect this robust outlook. The stock has an overall A rating, which translates to a Strong Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
It has an A grade for Value and Quality and a B for Growth. In the B-rated 42-stock Shipping industry, it is ranked #2. To see additional POWR Ratings of TK for Momentum, Stability, and Sentiment, click here.
Overseas Shipholding Group, Inc. (OSG)
OSG owns and operates a fleet of oceangoing vessels, which are engaged in the transportation of crude oil and petroleum products in the U.S. flag trade. It serves independent oil traders, refinery operators, and government entities.
On March 17, OSG announced that its Board of Directors had authorized a program to purchase up to 10 million shares of its common stock. This is expected to provide the company with greater flexibility to manage its cash flow to create value for shareholders.
OSG’s trailing-12-month levered FCF margin of 25.62% is 342.8% higher than the industry average of 5.79%. Likewise, its trailing-12-month cash per share of $1.32 is 69.7% higher than the industry average of $0.78.
For the first quarter that ended March 31, 2023, OSG’s shipping revenues increased 9.4% year-over-year to $113.79 million. Its operating income improved 192.7% from the year-ago value to $22.54 million.
The company’s net income and EPS amounted to $12.14 million and $0.14, versus a net loss of $509 thousand and $0.01, respectively, in the same period last year. Also, its adjusted EBITDA increased 61% from the year-ago value to $40.90 million.
In addition, its revenue and EBIT have grown at CAGRs of 8.9% and 27.7% over the past three years, respectively, while its EBITDA has improved at a CAGR of 17.4% in the same period.
OSG’s shares have gained 87.4% over the past year to close the last trading session at $3.86, higher than its 50-day and 200-day moving averages of $3.82 and $3.38, respectively.
It’s no surprise that OSG has an overall rating of A, which equates to a Strong Buy in our proprietary rating system. It has an A grade for Quality and a B for Growth, Value, and Sentiment. Out of 42 stocks in the same B-rated industry, it is ranked first.
In addition to the POWR Ratings stated above, we also have OSG’s rating for Momentum and Stability. Get all OSG ratings here.
StealthGas Inc. (GASS)
Based in Athens, Greece, GASS provides seaborne transportation services to Liquefied Petroleum Gas (LPG) producers and users and offers crude oil and natural gas. The company's carriers carry various petroleum gas products in liquefied form, including propane, butane, butadiene, isopropane, and vinyl chloride monomer, etc.
GASS’ trailing-12-month net income and levered FCF margins of 28.05% and 15.43% are 83.6% and 166.7% higher than the industry averages of 15.28% and 5.79%, respectively. Likewise, its trailing-12-month CAPEX/Sales of 15.51% is 22.2% higher than the industry average of 12.69%.
During the first quarter that ended March 31, 2023, GASS’ revenues increased 6.1% from the prior-year quarter to $38.06 million, while its adjusted EBITDA increased 38.4% from the year-ago value to $25.29 million.
The company’s adjusted net income and EPS amounted to $17.33 million and $0.45, representing increases of 97.5% and 95.6%, respectively, from the prior year period. Also, its income from operations increased 18.9% from the year-ago value to $9.73 million.
Analysts expect GASS' revenue and EPS for the fiscal year 2024 to increase 6.9% and 8.9% year-over-year to $156.90 million and $0.86, respectively. Moreover, it surpassed the EPS estimates in each of the trailing four quarters, which is promising.
Additionally, its revenue and EBIT have grown at CAGRs of 3.4% and 17.9% over the past three years, respectively. Likewise, its net income and EPS have improved at CAGRs of 140.2% and 146%, respectively, over the same period.
The stock has gained 12.6% over the past month and 15.3% year-to-date to close the last trading session at $3.09, higher than its 50-day and 200-day moving averages of $2.85 and $2.88, respectively.
GASS’ strong fundamentals are reflected in its POWR Ratings. It has an overall rating of B, which equates to Buy in our proprietary rating system.
It has an A grade for Sentiment and a B for Value and Quality. Within the same industry, it is ranked #4. Click here to see GASS’ ratings for Growth, Momentum, and Stability.
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TK shares were trading at $6.09 per share on Wednesday afternoon, up $0.10 (+1.67%). Year-to-date, TK has gained 34.14%, versus a 14.72% rise in the benchmark S&P 500 index during the same period.
About the Author: Anushka Mukherjee
Anushka's ultimate aim is to equip investors with essential knowledge that empowers them to make well-informed investment choices and attain sustained financial prosperity in the long run.
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