Despite the resurgence of COVID-19 cases, a severe supply-demand imbalance that is being exacerbated by continuing global supply chain disruptions, has been beneficial for most shipping operators. Investors’ interest in shipping stocks is evident in the Breakwave Dry Bulk Shipping ETF’s (BDRY) 90.22% gains over the past year versus the SPDR S&P 500 Trust ETF’s (SPY) 21.5% returns.
Furthermore, record freight rates due to a shortage of containerships, congestion in ports, and international post-pandemic demand for manufactured goods are helping shipping companies increase their profit margins. According to a report by Grand View Research, the global shipping container market is expected to grow at a 12% CAGR through 2028.
Given this backdrop, it could be wise to bet on fundamentally sound shipping companies Costamare Inc. (CMRE) and Danaos Corporation (DAC), whose stocks are already rallying in price. They are rated ‘Buy’ in our proprietary POWR Ratings system and we think have plenty of upside to deliver.
Costamare Inc. (CMRE)
Based in Monaco, Costamare Inc. owns and charters containerships to liner companies worldwide. It has a fleet of 81 containerships with a total capacity of approximately 581,000 twenty-foot equivalent units and 16 dry bulk vessels with a full capacity of roughly 932,000 DWT.
On Dec. 9, 2021, CMRE announced the execution of two shipbuilding contracts for containerships, the exercise of options for six additional containership new buildings, long-term charters for all eight new buildings with a leading liner company, and the acquisition of seven dry bulk vessels.
CMRE’s voyage revenue increased 100.4% year-over-year to $216.23 million for its fiscal third quarter, ended Sept. 30, 2021. The company’s adjusted net income grew 204.9% year-over-year to $81.54 million. And its adjusted EPS came in at $0.66, up 200% year-over-year.
For the quarter ending March 31, 2022, analysts expect CMRE’s EPS and revenue to increase 196.8% and 122.8%, respectively, year-over-year to $0.92 and $282.39 million. It surpassed the Street’s EPS estimates in three of the trailing four quarters. The stock has gained 47.2% in price over the past year to close yesterday’s trading session at $13.19.
CMRE’s POWR Ratings reflect this promising outlook. The company has an overall B rating, which translates to a Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 distinct factors, each with its own weighting.
The stock has an A grade for Momentum and a B grade for Growth and Sentiment. Within the Shipping industry, CMRE is ranked #14 of 46 stocks. Click here to see the additional POWR Ratings for CMRE (Stability, Value, and Quality).
Note that CMRE is one of the few stocks handpicked by our Chief Growth Strategist, Jaimini Desai, currently in the POWR Growth portfolio. Learn more here.
Danaos Corporation (DAC)
Based in Piraeus, Greece, DAC owns and operates 65 containerships that aggregate 403,793 twenty-foot equivalent units in capacity across Australia, Asia, Europe, and the United States. The company offers seaborne transportation services that include chartering its vessels to liner companies.
On Nov. 9, 2021, DAC’s CEO, Dr. John Coustas, said, “The continued strong performance of Danaos is ensured by existing charters with an average charter duration of 3.3 years and new charters that lock in current rates for several years. We expect strong market conditions to persist in the near term, which will support a strong re-chartering environment into next year and should ensure our stellar performance for the next three years."
DAC’s operating revenues increased 64.7% year-over-year to $195.92 million for its fiscal third quarter, ended Sept. 30, 2021. The company’s adjusted net income grew 131.6% year-over-year to $109.55 million. And its adjusted EPS came in at $5.32, up 178.5% year-over-year.
Analysts expect DAC’s EPS and revenue to increase 54.6% and 27.4%, respectively, year-over-year to $22.41 and $846.15 million in its fiscal 2022. It surpassed the consensus EPS estimates in three of the trailing four quarters. Over the past year, the stock has gained 177.1% in price to close yesterday’s trading session at $79.87.
DAC’s POWR Ratings reflect solid prospects. The company has an overall B rating, which translates to a Buy in our proprietary rating system. In addition, it has an A grade for Momentum and a B grade for Growth.
Click here to see the additional POWR Rating for DAC (Quality, Value, Stability, and Sentiment). DAC is ranked #15 in the Shipping industry.
CMRE shares were unchanged in premarket trading Wednesday. Year-to-date, CMRE has gained 4.27%, versus a -3.89% rise in the benchmark S&P 500 index during the same period.
About the Author: Nimesh Jaiswal
Nimesh Jaiswal's fervent interest in analyzing and interpreting financial data led him to a career as a financial analyst and journalist. The importance of financial statements in driving a stock’s price is the key approach that he follows while advising investors in his articles.
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