Amid sudden geopolitical tension in the Middle East, oil shipper Frontline has gapped up above an alternative buy point. FRO stock is Monday's selection of IBD 50 Growth Stocks To Watch as the Middle East friction sends oil stocks higher.
Frontline surged above its alternative entry of 18.84 on Monday, and shares are near a proper buy point of 19.29. Also, volume is almost double the average for the stock.
Further, the growth stock has a perfect Composite Rating of 99 and EPS Rating of 83. The Relative Strength Rating is nearly ideal at 98.
FRO holds second place in the oil and gas transportation and pipeline group which ranks 58th among IBD's 197 industry groups. The group has been showing strength as a whole, moving from 129th place just six weeks ago.
Five Quarters Of Higher Results
Frontline reversed from losses in 2022 and has shown five quarters of increasing sales and earnings since. Meanwhile, in the second quarter ended June 30, revenue grew 71% to $512.8 million while earnings of 94 cents a share of FRO stock rocketed 327% higher.
During the second quarter, Frontline realized net cash of $28.2 million from the sale of a Suezmax tanker.
The company realized profits of $230.7 million, its highest for a second quarter profits since 2008. That allowed the company to distribute a cash dividend of 80 cents per share.
For the third quarter, Frontline expects a lower time charter equivalent, which is a way of calculating net revenue per day after expenses for its vessels. Nonetheless, near-term geopolitical factors are giving the stock a lift as the price of crude oil rises.
FRO Stock: Strong Institutional Support
Frontline operates oil tankers and has a total of 66 vessels across three segments. Further, that includes very large crude carriers, the medium-size Suezmax and the smaller LR2/Aframax.
In the third quarter, Frontline entered into an agreement with Euronav to acquire 24 very large crude carriers at a total cost of $2.35 billion.
Frontline funded the acquisition through the sale of some of its stake in Euronav along with a debt provision. According to the company, the acquisition now makes Frontline one of the largest pure-play tanker companies by carrying capacity.
It generates revenue primarily through voyage and time charters. There also are vessel bookings per voyage or for a specific period of time.
Mutual funds hold 29% of outstanding shares. The stock's B+ shows also bullish support from fund managers.
Several sector exchange-traded funds hold shares of FRO stock. The Invesco Dynamic Oil & Gas Services ETF and the iShares Global Infrastructure Index ETF hold shares of FRO stock.
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