Persistent supply chain disruptions led to heightened demand for shipping services amid the reopening of economies last year. The industry is expected to continue to benefit from the robust demand and elevated rates as global supply chain disruptions are likely to continue until the second half of this year.
According to shipping consultancy Reveel, more than 97% of shippers will experience more than a 5.9% rate increase this year. “We probably peaked in December, but for the first quarter and probably even potentially into the second quarter, we’re really not going to see any deterioration at all in the [freight] rate environment,” Avery Vise, vice president of trucking research at FTR Transportation Intelligence said.
Therefore, fundamentally sound shipping stocks Danaos Corporation (DAC), Navios Maritime Partners L.P. (NMM), EuroDry Ltd. (EDRY), which have rallied more than 25% year-to-date, could continue to soar.
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, including chartering its vessels to liner companies.
On January 18, DAC announced its new charter arrangements for 11 vessels ranging between 2,500 to 10,000 TEU with major liner companies. The company has also entered into an agreement to sell its two 20-year-old 6,422 TEU vessels for a value of $130 million, which are expected to be delivered to their buyer in November 2022. About these developments, the company’s CEO, Dr. John Coustas, commented, “These transactions significantly improve our liquidity and cash flow visibility for the next several years and further strengthen our balance sheet.”
DAC’s operating revenues increased 79.7% year-over-year to $215.04 million in the fiscal fourth quarter ended December 31. Its adjusted net income grew 163.2% from the year-ago value to $125.84 million, while its adjusted EBITDA improved 91.7% year-over-year to $159.16 million. Its adjusted EPS increased 166.4% from the prior-year quarter to $6.10.
Street expects the company’s revenue to increase 57.8% year-over-year to $208.43 million in the fiscal first quarter ending March 2022. The consensus EPS estimate for the same period of $6.26 indicates a rise of 121.2% year-over-year. Also, DAC beat Street EPS estimates in three out of the trailing four quarters, which is impressive.
The stock has increased 175.9% over the past year and 32.5% year-to-date to close its last trading session at $98.89. The stock is currently trading above its 50-day and 200-day moving averages, indicating an uptrend.
DAC’s POWR Ratings reflect this promising outlook. The company has an overall rating of B, which translates to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree. DAC is rated an A in Momentum and a B in Growth. Within the Shipping industry, it is ranked #12 out of 45 stocks.
In addition to the POWR Ratings grades highlighted, one can see the DAC’s Value, Stability, Sentiment, and Quality ratings here.
Navios Maritime Partners L.P. (NMM)
NMM owns and operates dry cargo vessels in various parts of the world. The company provides seaborne transportation services for a range of dry cargo commodities, including iron ore, coal, grain, fertilizers, containers, and charters its vessels under medium to long-term charters. It is based in Monaco.
Last month, NMM declared a distribution of $0.05 per unit for the quarter ended December 31, 2021, payable on February 11, 2022. The distribution cumulates to an annual distribution of $0.20 per unit and reflects upon the company’s cash generation ability.
NMM’s revenue increased 253.4% year-over-year to $227.96 million in the fiscal third quarter ended September 30. Its adjusted net income, attributable to NMM, grew 1,383.3% from the year-ago value to $130.10 million, while its adjusted EBITDA improved 369.7% year-over-year to $145.23 million. Adjusted earnings attributable to NMM’s unitholders per common unit increased 511.5% from its year-ago value to $4.77.
The consensus revenue estimate of $276.14 million for the fiscal fourth quarter ended December 2021 indicates an increase of 298.9% year-over-year. Similarly, the consensus EPS estimate of $4.35 for the same quarter reflects a rise of 288.4% year-over-year. NMM has an impressive surprise earnings history, as it has topped the consensus EPS estimates in three out of the trailing four quarters.
NMM gained 28.4% year-to-date to close the last trading session at $32.22. It has gained 83.4% over the past year. NMM shares are trading above their 50-day and 200-day moving averages.
According to POWR Ratings, NMM is rated an A in Momentum and a B in Growth, Value, Sentiment, and Quality. In the Shipping industry, it is ranked #8. To get NMM’s Stability rating, click here.
EuroDry Ltd. (EDRY)
EDRY, based in Marousi, Greece, provides ocean-going transportation services worldwide. The company owns and operates dry bulk carriers that transport major bulks, such as iron ore, coal, grains, and minor bulks, including bauxite, phosphate, and fertilizers.
Last month, EDRY announced its acquisition of M/V Molyvos Luck, a 57,924 dwt dry bulk vessel, for $21.20 million. The vessel was expected to be delivered to the company by the end of January 2022. About this acquisition, Aristides Pittas, Chairman and CEO of EDRY, commented, “At current market rates, we expect that M/V Molyvos Luck will make a significant contribution to our net income and EBITDA.”
In December 2021, EDRY announced that it would redeem its Series B Preferred Shares with a dividend of 8% per annum, which was payable until January 2023, increasing to 14% per annum thereafter. Through this repurchase, the company intends to simplify its capital structure, reduce its funding costs, and increase EPS attributable to common shareholders by eliminating the preferred share dividend by about $0.38 in 2022 and by approximately $0.67 every year thereafter.
EDRY’s net revenues increased 248.1% year-over-year to $22.32 million in the fiscal fourth quarter ended December 31. Its operating income grew 9,975.4% from the year-ago value to $15.04 million, while its adjusted net income, attributable to common shareholders, improved 1,688.6% year-over-year to $12.26 million. Its adjusted EPS increased 1,361.8% from its year-ago value to $4.29.
The consensus revenue estimate of $17.70 million for the fiscal first quarter ending March 2022 indicates an increase of 106.4% year-over-year. Analysts expect EPS for the same period to come in at $2.98, reflecting a rise of 1468.4% year-over-year.
Over the past year, the stock has gained 211.8% and 26.1% year-to-date to close its last trading session at $24.01. The stock is trading above its 50-day and 200-day moving averages.
EDRY’s POWR Ratings reflect its solid fundamentals. The company has an overall B rating, which translates to Buy in our proprietary rating system. EDRY is rated an A in Momentum and a B in Growth. It is ranked #15 in the same industry. Get EDRY’s Value, Stability, Sentiment, and Quality ratings here.
DAC shares were trading at $97.78 per share on Friday afternoon, down $1.11 (-1.12%). Year-to-date, DAC has gained 30.98%, versus a -7.34% rise in the benchmark S&P 500 index during the same period.
About the Author: Subhasree Kar
Subhasree’s keen interest in financial instruments led her to pursue a career as an investment analyst. After earning a Master’s degree in Economics, she gained knowledge of equity research and portfolio management at Finlatics.
3 Shipping Stocks Up More Than 25% YTD That Have More Room to Run StockNews.com
