The shipping industry is poised for significant growth and expansion in the foreseeable years, driven by a surge in maritime trade volumes, a rising number of free-trade deals, and growing government initiatives and spending. Moreover, the transition toward digitalization and automation will speed up the industry.
Considering the industry’s bright outlook, it seems wise to invest in fundamentally sound shipping stocks Teekay Tankers Ltd. (TNK), Pyxis Tankers Inc. (PXS), and Top Ships Inc. (TOPS) for potential gains.
Despite economic and geopolitical uncertainty, the shipping industry is well-positioned for robust growth in the long term, thanks to growing global trade volumes, agreements on free commerce, the construction of additional ports, and favorable government spending. As demand for global freight surges, maritime trade volumes are poised to triple by 2050.
With growing federal support, the United States is leading the ongoing transition to zero-emission shipping. For example, the Inflation Reduction Act includes a new $3 billion rebate and grant program at the Environmental Protection Agency to provide funding for zero-emission equipment and technology.
Furthermore, the Department of Transportation announced approximately $703 million to fund 41 projects in 22 states and one territory aiming to improve port facilities via the Maritime Administration’s Port Infrastructure Development Program.
According to a report by Market Research Future, the global cargo shipping market is expected to grow to $20.67 billion by 2027 at a CAGR of 5.20%.
Additionally, digitalization in the shipping industry would create new growth opportunities. Maritime industry players increasingly adopt emerging technologies, such as AI, blockchain, IoT, and automation, which help them enhance efficiency, streamline existing processes, and transform supply chains and trade geography.
As per a report by Research and Markets, the maritime digitization market is projected to grow at a CAGR of 14.2% during the forecast period of 2023 to 2031.
Given the industry’s tailwinds, investing in fundamentally sound shipping stocks TNK, PXS, and TOPS could be wise now for solid returns.
Let’s take a closer look at the fundamentals of these stocks:
Teekay Tankers Ltd. (TNK)
TNK offers marine transportation services to oil industries internationally. The company provides voyage and time charter services; and offshore ship-to-ship transfer services of commodities, mainly crude oil and refined oil products. Also, it offers tanker commercial and technical management services.
On May 11, TNK’s Board of Directors updated the company’s capital allocation plan, focusing on balance sheet strength and well-timed fleet reinvestments to be supplemented by capital returns to shareholders.
The company’s Board of Directors declared a special cash dividend of $1 per share of Class A and B common stock and a regular, fixed quarterly cash dividend of $0.25 per share. Both these cash dividends were paid on June 2, 2023, to all common shareholders as of May 22, 2023. Further, TNK announced a new share repurchase program of $100 million.
For the second quarter that ended June 30, 2023, TNK’s total revenues increased 52.9% year-over-year to $370.65 million. The company’s adjusted EBITDA came in at $184.50 million, up 215.8% from the prior year’s quarter. Also, its adjusted net income and adjusted EPS were $149.44 million and $4.38, increases of 482.4% and 476.3% year-over-year, respectively.
Analysts expect TNK’s revenue and EPS for the current fiscal year (ending December 2024) to increase 60.1% and 133.2% year-over-year to $908.71 million and $14.90, respectively. In addition, the company has surpassed the consensus EPS estimates in three of the trailing four quarters.
Shares of TNK have gained 13.3% over the past six months and 76.1% over the past year to close the last trading session at $42.66.
TNK’s POWR Ratings reflect this robust outlook. The stock has an overall rating of B, translating to Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
TNK has a grade of A for Momentum and a B for Value and Quality. It is ranked #6 among 44 stocks in the Shipping industry.
Click here to see the other ratings of TNK for Growth, Stability, and Sentiment.
Pyxis Tankers Inc. (PXS)
PXS, a Greece-based maritime transportation holding company, specializes in medium-range (MR2) product tankers. Its fleet transports several refined petroleum products. The company operates a fleet of four double-hull tankers, Pyxis Epsilon, Pyxis Theta, Pyxis Karteria, and Pyxis Lamda, with capacities ranging from 46,652 to 51,795 dwt.
On March 24, PXS’ completed the sale of Pyxis Malou, a 2009 built 50,667 dwt product tanker, for the aggregate sale price of $24.8 million. After the repayment of the vessel’s bank debt and other transaction costs, the company received aggregate net cash proceeds of nearly $18.90 million.
In addition, selling the oldest vessel in PXS’ fleet would increase its liquidity, reduce outstanding debt, and position the company for further corporate opportunities.
PXS’ net revenues for the three months that ended June 30, 2023, rose 69% year-over-year to $16.06 million. Its operating income was $5.66 million, an increase of 44.3% from the prior year’s corresponding period. Its net income rose 62% from the year-ago value to $4.79 million.
Furthermore, the company’s income per common share increased 65.2% year-over-year to $0.38.
Street expects PXS’ EPS for the current year (ending December 2023) to increase 30.2% year-over-year to $1.38. For the fiscal year 2024, the company’s revenue is expected to grow 65% from the previous year to $57.94 million. Moreover, PXS has topped the consensus EPS estimates in all four trailing quarters, which is impressive.
Over the past year, the stock has gained 9.6% to close the last trading session at $3.55.
PXS’ strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system.
PXS is ranked #7 among 44 stocks in the same industry. The stock has an A grade for Momentum and a B for Value, Sentiment, and Quality.
To see the other ratings of PXS for Growth and Stability, click here.
Top Ships Inc. (TOPS)
Headquartered in Maroussi, Greece, TOPS specializes in global oil, petroleum, and chemical transportation using eco-friendly tanker vessels. The company’s fleet includes 3 MR2 tankers for product/chemical transport, 5 Suezmax tankers for crude oil, and 2 VLCC tankers for larger crude oil shipments.
On July 20, TOPS announced extending time charter agreements with Clearlake Shipping for two “ECO” tanker vessels, M/T Eco West Coast and M/T Eco Malibu.
The extension period, which commences after the expiration of the present-time charters in the first quarter of 2024, has a firm duration of 30-36 months at a gross daily rate of $32,850. Original terms, including the charterer’s option for a two-year extension at higher rates, remain. This extension would generate around $72 million in additional revenue backlog.
On June 21, TOPS submitted a Form 20-F registration to the SEC, proposing a spin-off for its subsidiary Rubico Inc. The spin-off will establish Rubico as an independent publicly-traded company, initially centered around the M/T Eco Malibu Suezmax tanker.
This strategic move would allow investors to independently invest in the specialized Suezmax sector, thereby maximizing shareholder value.
For the six months that ended on June 30, 2023, TOPS’ total revenues were $41.15 million, an increase of 5.9% year-over-year. Its operating income grew 7.6% year-over-year to $16.27 million. The company’s net income and comprehensive income attributable to common shareholders was $2.29 million, compared to a net loss of $13.12 million in the same period of 2022.
In addition, the company earnings per common share were $0.10, compared to a loss per common share of $6.15 in the prior-year period.
Analysts expect TOPS’ revenue for the next fiscal year (ending December 2024) to increase 4.7% year-over-year to $87.10 million. Likewise, the consensus EPS estimate of $0.22 for the same period indicates a 120% rise year-over-year.
TOPS’ stock has gained 20.9% over the past month and 15.8% over the three months to close the last trading session at $0.85.
TOP’ POWR Ratings reflect this promising outlook. The stock has an overall B rating, translating to Buy in our proprietary rating system.
TOPS has a grade A for Momentum and Sentiment and B for Quality and Value. It is ranked #5 out of 44 stocks in the Shipping industry.
Beyond what we stated above, we also have TOPS’s ratings for Growth and Stability. Get all TOPS ratings here.
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TNK shares were unchanged in premarket trading Wednesday. Year-to-date, TNK has gained 43.73%, versus a 16.63% rise in the benchmark S&P 500 index during the same period.
About the Author: Mangeet Kaur Bouns
Mangeet’s keen interest in the stock market led her to become an investment researcher and financial journalist. Using her fundamental approach to analyzing stocks, Mangeet’s looks to help retail investors understand the underlying factors before making investment decisions.
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