The shipping industry is thriving as the global merchandise trade grows, driven by increased consumer spending, stronger supply chains, and innovations in logistics and digital platforms. This recovery offers promising investment opportunities and boosts optimism for future growth, despite some uncertainties in the sector.
Therefore, it could be a smart move to invest in fundamentally strong shipping stocks that are capitalizing on global trade, such as ZIM Integrated Shipping Services Ltd. (ZIM) and Matson, Inc. (MATX).
The World Trade Organization's (WTO) goods barometer rose to 103, signaling a recovery in global merchandise trade above the long-term average. This increase, driven by strong performance in autos, shipping containers, and air freight, suggests a rebound in the third quarter of 2024. Moreover, the WTO forecasts a 2.6% rise in total goods trade for 2024, reversing last year’s decline.
Additionally, rising U.S. imports, the expansion of e-commerce, advancements in seaborne transportation, and robust container movement are driving trade and fueling industry growth. According to Modor Intelligence, the container shipping market is projected to reach $134.03 billion by 2029, with a strong CAGR of 3.1%, underscoring the sector's dynamic expansion.
Furthermore, relaxed trade policies, innovations, and the demand for cost-effective cargo shipping for large shipments, especially over long distances, are driving up trade in intermediate and manufactured goods while reducing costs. As a result, the cargo shipping market is projected to grow from 11.89 billion tons in 2024 to 14.72 billion tons by 2032, with a 2.7% CAGR.
Given these favorable trends, let's take a closer look at the fundamentals of the two Shipping picks, starting with number two.
Stock #2: ZIM Integrated Shipping Services Ltd. (ZIM)
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.
On September 9, 2024, ZIM announced a new long-term operational cooperation with Mediterranean Shipping Company (MSC) for transpacific trade, set to launch six services from Asia to the U.S. East Coast and Gulf starting February 2025.
This partnership aims to enhance service quality and operational efficiency, utilizing larger, eco-friendly vessels as part of ZIM's fleet renewal program.
On July 30, 2024, ZIM announced the grand opening of its new U.S. headquarters in Virginia Beach, VA, on July 30, 2024. The facility, located on "ZIM Way," marks a significant milestone for the company, emphasizing its commitment to growth and innovation.
In terms of the trailing-12-month levered FCF margin, ZIM’s 17.48% is 167.8% higher than the 6.53% industry average.
During the fiscal second quarter ended June 30, 2024, ZIM’s total revenues increased 47.6% year-over-year to $1.93 billion. The company’s net income and EPS came in at $373 million and $3.08, compared to a net loss and loss per share of $213 million and $1.79 in the year-ago quarter. Also, the company’s adjusted EBITDA rose 187.5% from the year-ago value to $766 million.
Analysts expect ZIM’s revenue for the quarter ending September 30, 2024, to increase 88.8% year-over-year to $2.40 billion. ZIM’s stock has gained 120.7% over the past six months to close the last trading session at $20.41.
ZIM’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 #13 out of 37 stocks in the A-rated Shipping industry. It has a B grade for Growth, Value, Momentum, and Quality. To see ZIM’s Stability and Sentiment ratings, click here.
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 net income margin, MATX’s 10.41% is 68.9% higher than the 6.16% industry average. Its 7.76% trailing-12-month Capex / Sales is 167.1% higher than the 2.90% industry average. Also, its 12.78% trailing-12-month levered FCF margin is 95.7% higher than the 6.53% 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 57.9% over the past year to close the trading session at $137.18.
MATX’s strong fundamentals are reflected in its POWR Ratings. It has an overall rating of B, translating to a Buy in our proprietary rating system.
It has a B grade for Value, Momentum, and Quality. It is ranked #4 in the Shipping industry. To access additional grades of MATX for Growth, Stability, and Sentiment ratings, click here.
What To Do Next?
43 year investment veteran, Steve Reitmeister, has just released his 2024 market outlook along with trading plan and top 11 picks for the year ahead.
MATX shares were trading at $136.27 per share on Friday afternoon, down $0.91 (-0.66%). Year-to-date, MATX has gained 25.36%, versus a 20.31% 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.
Why These 2 Shipping Stocks Are a Smart Buy for 2024? StockNews.com
