The growth prospects of the shipping industry are anticipated to be bolstered by the rising demand for reliable shipping services across borders and tech advancements. In light of this, it might be prudent to consider watching robust shipping stocks Danaos Corporation (DAC), International Seaways, Inc. (INSW), and TORM plc (TRMD) this year-end.
As economies recover from the impact of the COVID-19 pandemic and trade volumes rebound, the demand for shipping services is anticipated to rise. The surge in e-commerce activities is driving demand for efficient and reliable shipping services to transport goods across borders and to consumers' doorsteps.
Modern technology and improvements have turned boats and small vessels into robust, long-lasting, huge watercraft that can carry bulk products and passengers. Strong industrial and economic expansion has boosted current cargo freight and carrier networks. Cargo shipping market is projected to grow at a CAGR of 5.1% until 2032.
Additionally, digitalization in the shipping industry would create new growth opportunities. The rising adoption of IoT, AI, and big data technologies in the maritime industry is fueling the market growth. As per a report by Research and Markets, the maritime digitization market is projected to grow at a CAGR of 14.2% until 2031.
With these favorable trends in mind, let’s delve into the fundamentals of the three best Shipping stocks, beginning with the third choice.
Stock #3: TORM plc (TRMD)
TRMD is a product tanker company that engages in the transportation of refined oil products and crude oil worldwide. It operates in two operating segments, Tanker and Marine Exhaust.
TRMD’s trailing-12-month gross profit margin of 59.80% is 26.4% higher than the industry average of 47.32%. Its trailing-12-month asset turnover ratio of 0.59x is 7.7% higher than the industry average of 0.55x.
During the fiscal third quarter that ended September 30, 2023, TRMD’s revenue increased 13.7% year-over-year to $1.13 billion. Operating profit came in at $503.30 million while its net profit for the period came in at $463.40 million. Its EPS came in at $1.42.
Analysts expect TRMD’s revenue to be $1.41 billion for the fiscal year ending December 2023. Its EPS is expected to increase 8.4% year-over-year to $7.18 for the same year. Also, it has surpassed revenue estimates in each of the four trailing quarters.
Over the past six months, the stock has gained 17.3% to close the last trading session at $29.98.
TRMD’s strong fundamentals are reflected in its POWR Ratings. It has an overall rating of B, which equates to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, each weighted optimally.
The stock has an A grade for Sentiment and a B in Momentum. It is ranked #13 out of the 42 stocks in the Shipping industry.
Click here to access the additional TRMD ratings (Growth, Value, Stability, and Quality).
Stock #2: International Seaways, Inc. (INSW)
INSW owns and operates a fleet of oceangoing vessels for the transportation of crude oil and petroleum products in the international flag trade. It operates in two segments: Crude Tankers; and Product Carriers.
INSW’s trailing-12-month ROCE margin of 43.12% is 113.3% higher than the industry average of 20.21%. Its trailing-12-month gross profit margin of 73.55% is 55.4% higher than the industry average of 47.32%.
INSW’s total shipping revenues for the third quarter ended September 30, 2023, rose 7.6% year-over-year to $241.71 million. Its operating income came in at $114.16 million. Its net income stood at $97.94 million. The company’s net income per share came in at $2.00.
Its EPS and revenue are expected to grow 36.1% and 22.6% year-over-year to $10.40 and $1.05 billion in the fiscal year 2023. Also, it has surpassed the EPS and revenue estimates in three of the four trailing quarters.
INSW’s shares have gained 39.1% over the past year to close the last trading session at $46.34.
It’s no surprise that INSW has an overall rating of B, which translates to a Buy in our POWR Ratings system.
It has a B grade for Sentiment, Momentum, and Quality. It is ranked #12 out of 42 stocks in the same industry.
Beyond what is stated above, we’ve also rated INSW for Growth, Value, Stability. Get all INSW ratings here.
Stock #1: 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.
On December 6, 2023, DAC paid its shareholders a dividend of $0.80 per share of common stock for the third quarter of 2023. Its annual dividend of $3.20, which yields 4.46% on the current market prices, higher than the four-year average of 2.23%.
As of November 11, 2023, DAC had repurchased a total of 1,570,195 shares of its common stock in the open market for $97.4 million under the previously announced share repurchase program of up to $100 million in June 2022. Additionally, its Board approved another share repurchase program of up to $100 million on November 10, 2023.
In September 2023, the company entered into agreements to acquire two Capesize bulk carriers, with a combined DWT of 351,765, for a total of $36.6 million. The delivery of these vessels is expected between November and December 2023.
DAC’s trailing-12-month ROCE margin of 21.79% is 78.2% higher than the industry average of 12.23%. Its trailing-12-month gross profit margin of 78.57% is 159.5% higher than the industry average of 30.28%.
During the fiscal third quarter ended September 30, 2023, DAC’s operating revenues came in at $239.22 million. The company’s adjusted net income came in at $142.96 million and $7.26 per share. Its adjusted EBITDA stood at $178.03 million.
As of September 30, 2023, DAC’s total current assets stood at $498.20 million compared to $372.52 million as of December 31, 2022. Also, its total current liabilities stood at $173.08 million compared to $228.41 million for the same period.
Street expects DAC’s EPS to rise 11.4% year-over-year to $7.79 in the fiscal fourth quarter ending December 2023. Its revenue for the same quarter is likely to be $245.69 million. The company has exceeded the consensus revenue estimates in each of the trailing four quarters, which is remarkable.
The stock has gained 34% over the past year to close the last trading session at $71.70.
DAC’s POWR Ratings reflect this promising outlook. The stock has an overall B rating, equating to a Buy in our POWR Ratings system.
It also has an A grade for Quality and a B for Value and Momentum. It is ranked #6 out of 42 stocks in the B-rated Shipping industry.
Beyond what is stated above, we’ve also rated DAC for Growth, Stability and Sentiment. Get all DAC ratings here.
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TRMD shares were trading at $30.72 per share on Thursday morning, up $0.74 (+2.47%). Year-to-date, TRMD has gained 24.69%, versus a 24.98% rise in the benchmark S&P 500 index during the same period.
About the Author: Nidhi Agarwal
Nidhi is passionate about the capital market and wealth management, which led her to pursue a career as an investment analyst. She holds a bachelor's degree in finance and marketing and is pursuing the CFA program. Her fundamental approach to analyzing stocks helps investors identify the best investment opportunities.
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