The shipping industry shows promise with rising global demand, increased U.S. imports and e-commerce expansion, and robust container movement. Therefore, it could be a smart move to invest in fundamentally strong shipping stocks that are capitalizing on global trade, such as Danaos Corporation (DAC), Global Ship Lease, Inc. (GSL), and Matson, Inc. (MATX).
Despite challenges such as labor shortages, logistical issues, and geopolitical tensions impacting shipping routes, the industry’s strong growth prospects remain strong. Advancements in technology, sustainable practices, and expanding logistics infrastructure are driving future expansion, making investing now a promising opportunity.
Meanwhile, global supply chain growth, relaxed trade policies, and innovations in cargo shipping are driving up trade in intermediate and manufactured goods, while also lowering coordination and transportation costs. The cargo shipping market is projected to expand from 11.89 billion tons in 2024 to 14.72 billion tons by 2032, with a 2.7% CAGR, due to its cost-effective and eco-friendly long-distance transport.
Moreover, advancements in seaborne transportation, container ships, and logistics services are significantly boosting global trade networks and fueling the industry's expansion. The container shipping market is projected to reach $134.03 billion by 2029, with a robust CAGR of 3.1%, highlighting the sector's dynamic growth.
Given these favorable trends, let's take a closer look at the fundamentals of the three Shipping picks, starting with number three.
Stock #3: Danaos Corporation (DAC)
Based in Piraeus, Greece, DAC and its subsidiaries own and operate containerships in Australia, Asia, Europe, and the United States. The company offers seaborne transportation services, such as chartering its vessels to liner companies.
In terms of the trailing-12-month EBIT margin, DAC’s 55.77% is 460.2% higher than the 9.96% industry average. Likewise, its 18.95% trailing-12-month Return on Common Equity is 47.9% higher than the 12.81% industry average. Additionally, its 68.09% trailing-12-month EBITDA margin is 394.8% higher than the 13.76% industry average.
During the fiscal second quarter ended June 30, 2024, DAC’s operating revenues increased 2% year-over-year to $246.31 million. Its income from operations was $139.98 million for the quarter. The company’s adjusted net income and adjusted EPS were $132.31 million and $6.78, respectively.
Moreover, as of June 30, 2024, DAC’s cash and cash equivalents stood at $372.45 million, compared to $271.81 million as of December 31, 2023.
Analysts expect DAC’s revenue for the quarter ending September 30, 2024, to increase 5% year-over-year to $251.16 million. Its EPS for the quarter ending December 31, 2024, is expected to increase 5.9% year-over-year to $7.40. DAC’s stock has gained 22.8% over the past nine months to close the last trading session at $83.63.
DAC’s POWR Ratings reflect solid prospects. It has an overall rating of B, which translates to a Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
It is ranked #15 out of 41 stocks in the A-rated Shipping industry. It has a B grade for Stability and Quality. To see DAC’s Growth, Value, Momentum, and Sentiment ratings, click here.
Stock #2: Global Ship Lease, Inc. (GSL)
Based in Athens, Greece, GSL and its subsidiaries engage in owning and chartering containerships under fixed-rate charters to container shipping companies worldwide. As of March 11, 2024, it owned 68 mid-sized and smaller containerships, ranging from 2,207 to 11,040 twenty-foot equivalent units (TEU), with an aggregate capacity of 375,406 TEU.
In terms of the trailing-12-month EBITDA margin, GSL’s 64.77% is 370.7% higher than the 13.76% industry average. Likewise, its 47.30% trailing-12-month net income margin is 668.4% higher than the 6.16% industry average. Furthermore, its 70.06% trailing-12-month gross profit margin is 123.7% higher than the 31.32% industry average.
For the fiscal second quarter ended June 30, 2024, GSL’s operating revenues were $175 million, an 8% increase year-over-year. Similarly, its operating income rose 10.3% from the year-ago value to $93.84 million.
GSL’s adjusted EBITDA grew 13.1% year-over-year to $122.35 million. The company’s normalized net income and normalized EPS increased 17.1% and 17.7%, respectively, over the prior-year quarter, reaching $86.66 million and $2.46.
Street expects GSL’s EPS for the quarter ending September 30, 2024, to increase 6% year-over-year to $2.47. Its revenue for the same quarter is expected to grow marginally year-over-year to $175.82 million. GSL surpassed the consensus EPS estimates in each of the trailing four quarters. The stock has gained 52.6% over the past nine months to close the last trading session at $27.24.
GSL’s positive outlook is reflected in its POWR Ratings. It has an overall rating of B, translating to a Buy in our proprietary rating system.
It has an A grade for Quality and a B for Value. It is ranked #4 in the same industry. Click here to see GSL’s Growth, Momentum, Stability, and Sentiment ratings.
Stock #1: 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 levered FCF margin, MATX’s 12.78% is 93% higher than the 6.62% industry average. Its 7.76% trailing-12-month Capex / Sales is 167% higher than the 2.91% industry average. Also, its 10.41% trailing-12-month net income margin is 69.1% higher than the 6.16% 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 ending 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 the Street EPS estimates in each of the trailing four quarters. MATX’s stock has gained 52.9% over the past year to close the trading session at $135.11.
MATX’s strong fundamentals are reflected in its POWR Ratings. It has an overall rating of A, translating to a Strong Buy in our proprietary rating system.
It has a B grade for Sentiment and Quality. It is ranked #2 in the Shipping industry. To access additional grades of MATX for Growth, Value, Momentum, and Stability ratings, click here.
What To Do Next?
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MATX shares were trading at $131.68 per share on Tuesday afternoon, down $4.21 (-3.10%). Year-to-date, MATX has gained 21.14%, versus a 18.45% rise in the benchmark S&P 500 index during the same period.
About the Author: Abhishek Bhuyan
Abhishek embarked on his professional journey as a financial journalist due to his keen interest in discerning the fundamental factors that influence the future performance of financial instruments.
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