The shipping industry is expected to witness steady growth ahead with increasing demand for global freight and expanding global trade networks. So, it could be wise to buy fundamentally strong shipping stocks Danaos Corporation (DAC), Tsakos Energy Navigation Limited (TNP), Teekay Corporation (TK), Overseas Shipholding Group, Inc. (OSG), and Dynagas LNG Partners LP (DLNG).
Before diving deeper into their fundamentals, let’s discuss what’s happening in the shipping industry.
The global shipping industry is responsible for around 90% of world trade, and with the growing efficiency and increased economic liberalization, the prospects for the industry look bright. According to the Organisation for Economic Co-operation and Development, maritime trade volumes are set to triple by 2050.
The global cargo shipping market is projected to reach $4.2 trillion by 2031, growing at a CAGR of 7%, driven by factors such as an increase in international marine freight transport, a rise in demand for cargo transportation through ships, and a surge in trade-related agreements.
Moreover, automation and the growth of the digital freight forwarding industry create lucrative growth opportunities for the market. The global digital freight forwarding market is projected to reach $22.92 billion in 2030, registering a CAGR of 23.1%.
Now, let’s take a closer look at the fundamentals of the featured stocks.
Danaos Corporation (DAC)
Based in Piraeus, Greece, DAC and its subsidiaries own and operates 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 EBITDA margin, DAC’s 70.76% is 419.5% higher than the 13.62% industry average. Likewise, its 51.40% trailing-12-month net income margin is 725.5% higher than the 6.23% industry average. Furthermore, its 78.84% trailing-12-month gross profit margin is 160% higher than the 30.33% industry average.
DAC’s operating revenues for the fiscal second quarter ended June 30, 2023, came in at $241.48 million. The company’s adjusted net income came in at $143.41 million. Its adjusted EBITDA came in at $177.33 million. Additionally, its adjusted earnings per share came in at $7.14.
Analysts expect DAC’s EPS for the quarter ending December 31, 2023, to increase 11.9% year-over-year to $7.82. It surpassed the consensus EPS estimates in three of the trailing four quarters. The stock has gained 32.2% year-to-date to close the last trading session at $69.59.
DAC’s positive outlook is reflected in its POWR Ratings. It has an overall rating of A, translating to a Strong Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
It has an A grade for Quality and a B for Value and Momentum. It is ranked #3 out of 44 stocks in the A-rated Shipping industry. To see DAC’s Growth, Stability, and Sentiment ratings, click here.
Tsakos Energy Navigation Limited (TNP)
Based in Athens, Greece, TNP provides seaborne crude oil and petroleum product transportation services worldwide. The company offers marine transportation services for national, major, and other independent oil companies and refiners under long, medium, and short-term charters.
In terms of the trailing-12-month EBIT margin, TNP’s 37.57% is 53.9% higher than the 24.42% industry average. Likewise, its 38.61% trailing-12-month net income margin is 169.1% higher than the 14.35% industry average. Furthermore, its 34.30% trailing-12-month Capex/Sales is 148.9% higher than the 13.78% industry average.
For the first quarter ended March 31, 2023, TNP’s net voyage revenues increased 74.5% year-over-year to $261.21 million. Its operating income rose 1,981.2% year-over-year to $199.15 million. Its net income attributable to common stockholders came in at $167.88 million, compared to a year ago net loss of $3.15 million.
The company’s adjusted EBITDA rose 267.6% year-over-year to $155.01 million. Additionally, its EPS came in at $5.69, compared to a year ago loss per share of $0.12.
Street expects TNP’s EPS and revenue for the quarter ended June 30, 2023, to increase 69.4% and 34.8% year-over-year to $2.71 and $207.50 million, respectively. Over the past year, the stock has gained 50% to close the last trading session at $21.37.
TNP’s POWR Ratings reflect strong prospects. It has an overall rating of A, which translates to a Strong Buy in our proprietary rating system.
It is ranked #4 in the same industry. It has an A grade for Momentum and a B for Growth, Value, and Sentiment. In addition to the POWR Ratings grades I’ve just highlighted, you can see TNP’s ratings for Stability and Quality here.
Teekay Corporation (TK)
Headquartered in Hamilton, Bermuda, TK engages in international crude oil and other marine transportation services worldwide. The company owns and operates crude oil and refined product tankers. It also provides ship-to-ship support services; tanker commercial management and technical management operation services; and operational and maintenance marine services.
In terms of the trailing-12-month EBIT margin, TK’s 36.71% is 50.3% higher than the 24.42% industry average. Likewise, its 25.04% trailing-12-month levered FCF margin is 302% higher than the 6.23% industry average. Furthermore, its 0.74x trailing-12-month asset turnover ratio is 20.9% higher than the 0.61x industry average.
TK’s revenues for the second quarter ended June 30, 2023, increased 40.8% year-over-year to $395.40 million. Its income from vessel operations increased 488.5% year-over-year to $157.67 million. Its adjusted net income attributable to shareholders came in at $42.77 million.
Its adjusted EBITDA rose 254.1% year-over-year to $182.05 million. Additionally, its EPS came in at $0.41, representing a 720% increase year-over-year.
Over the past year, TK has gained 95.6% to close the last trading session at $6.59.
It’s no surprise that TK has an overall rating of A, which translates to a Strong Buy in our POWR Ratings system.
It has an A grade for Value, Momentum, and Quality and a B for Growth. It is ranked #2 in the Shipping industry. For additional ratings of TK for Stability and Sentiment, click here.
Overseas Shipholding Group, Inc. (OSG)
OSG and its subsidiaries, owns and operates a fleet of oceangoing vessels in the United States. Its vessels are engaged in the transportation of crude oil and petroleum products in the United States flag trade.
In terms of the trailing-12-month levered FCF margin, OSG’s 26.25% is 321.5% higher than the 6.23% industry average.
OSG’s shipping revenues for the second quarter ended June 30, 2023, came in at $106.63 million. The company’s operating income rose 60.3% year-over-year to $20.27 million. Its net income rose 229% year-over-year to $12.30 million. Its adjusted EBITDA increased 25.4% year-over-year to $39.47 million.
Additionally, its EPS for class-A came in at $0.15, representing a 275% increase year-over-year.
Over the past year, OSG has gained 51.9% to close the trading session at $4.07.
OSG’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 an A grade for Momentum and Quality and a B for Growth and Value. It is ranked first in the same industry. Click here to see the additional POWR Ratings for OSG (Stability and Sentiment).
Dynagas LNG Partners LP (DLNG)
Headquartered in Athens, Greece, DLNG, through its subsidiaries, operates in the seaborne transportation industry worldwide. The company owns and operates liquefied natural gas (LNG) carriers.
In terms of the trailing-12-month levered FCF margin, DLNG’s 74.20% is significantly higher than the 6.23% industry average. Likewise, its 29.28% trailing-12-month net income margin is 104.1% higher than the 14.355 industry average. Furthermore, its 61.90% trailing-12-month EBITDA margin is 60% higher than the 38.69% industry average.
DLNG’s voyage revenues for the first quarter ended March 31, 2023, increased 12% year-over-year to $37.26 million. The company’s operating income rose 54% year-over-year to $19.34 million. Its adjusted net income rose came in at $6.52 million. Its adjusted EBITDA increased 2.7% year-over-year to $23.56 million. Additionally, its earnings per common unit came in at $0.10.
For the quarter ended June 30, 2023, analysts expect DLNG’s EPS and revenue to increase 5.9% and 1% year-over-year to $0.18 and $33.68 million, respectively. Over the past three months, the stock has gained 13.9% to close the trading session at $2.79.
DLNG’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 an A grade for Momentum and a B for Stability, Sentiment, and Quality. It is ranked #4 in the same industry. Click here to see the DLNG’s additional POWR Ratings for Growth and Value.
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DAC shares were trading at $69.10 per share on Monday afternoon, down $0.49 (-0.70%). Year-to-date, DAC has gained 34.59%, versus a 17.80% 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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