Danaos Corporation (DAC), one of the world's largest independent owners of container vessels and drybulk vessels, reported solid second-quarter financial results. The company reported record quarterly operating revenues of $246.31 million, surpassing analysts’ estimate by $8.39 million.
Analysts’ expectations for the upcoming quarters remain positive. DAC’s revenue for the fourth quarter (ending December 2024) is expected to increase 8.8% year-over-year to $259.94 million and its EPS is expected to grow 5.9% year-over-year to $7.40 for the same quarter.
During the second quarter, DAC took delivery of its first three newbuilding containerships, consisting one 7,165 TEU and two 8,010 TEU vessels and it had also added 6 newbuilding containerships to the orderbook. Further, the company secured multi-year charter arrangements for all of the vessels in its newbuilding orderbook with an average charter duration of about 4.5 years.
As of August 5, Danaos had repurchased total 1,671,059 shares of its common stock from the open market for $104.4 million under its $200 million authorized share repurchase program originally introduced in June 2022. DAC declared a dividend of $0.80 per share of common stock for the second quarter, payable on August 29, 2024, to stockholders of record as of August 20, 2024.
Danaos' CEO Dr. John Coustas commented, “With respect to our activities in the dry bulk sector, we have recently taken delivery of all 10 capesize vessels. We have been gearing up our operations to ensure the integration within our fleet during this building phase before we continue to explore opportunities to further our reach in this sector.”
He added, “Our revenues from the dry bulk sector have been steadily increasing, and we look forward to further diversifying our revenues and creating upside through the spot market exposure offered by the sector. Despite our recent fleet growth, renewal, and diversification activities, our balance sheet remains very strong, with a low net debt position.”
Shares of DAC have surged 15.2% over the past six months and 18.4% over the past year to close its last trading session at $82.58.
Let’s look at factors that could influence DAC’s performance in the upcoming months.
Robust Financials
DAC’s operating revenues increased 2% year-over-year to $246.31 million during the second quarter that ended June 30, 2024 and its income from operations was $139.98 million for the quarter. In addition, the company’s adjusted net income and adjusted EPS came in at $132.31 million and $6.78 for the quarter, respectively.
Also, the company’s cash and cash equivalents stood at $372.45 million as of June 30, 2024, compared to $271.81 million as of December 31, 2023.
Solid Historical Growth
DAC’s revenue and EBITDA have grown at respective CAGRs of 24.1% and 25.6% over the past three years. The company’s EBIT has increased at a CAGR of 32.7% over the same timeframe, while its normalized net income and tangible book value have improved at CAGRs of 40.5% and 24.1%, respectively.
Furthermore, the company’s total assets have grown at a CAGR of 8.1% over the past three years.
Favorable Analyst Estimates
Analysts expect DAC’s revenue for the fourth quarter (ending December 2024) to increase 8.8% year-over-year to $259.94 million. The consensus EPS estimate of $7.40 for the same quarter indicates a 5.9% year-over-year improvement. Moreover, DAC has an impressive earnings surprise history, having topped consensus revenue estimates in three of the trailing four quarters.
For the fiscal year ending December 2024, the company’s revenue is expected to grow 2.5% year-over-year to $986.93 million, while its EPS is expected to be $28.32 for the same period.
High Profitability
DAC’s trailing-12-month EBIT margin of 55.77% is 458.7% higher than the industry average of 9.98%. Its trailing-12-month net income margin of 58.15% is significantly higher than the industry average of 6.14%. Similarly, its trailing-12-month gross profit margin of 74.67% is 137.7% higher than the industry average of 31.41%.
Furthermore, the stock’s trailing-12-month ROCE, ROTC, and ROTA of 18.95%, 9.77%, and 14.20% favorably compared to the industry averages of 12.80%, 7.12%, and 4.94%, respectively.
POWR Ratings Reflect Promise
DAC’s solid fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, translating to a Buy in our proprietary system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
Our proprietary rating system also evaluates each stock based on eight distinct categories. DAC has a B grade for Quality, consistent with its higher-than-industry profitability.
In addition, the stock has a B grade for Stability, in sync with its impressive historical growth and solid financial performance in the last reported quarter.
DAC is ranked #16 in the 42-stock A-rated Shipping industry.
Beyond what I have stated above, we have also given DAC grades for Growth, Sentiment, Value, and Momentum. Get access to all the DAC ratings here.
Bottom Line
DAC reported better-than-expected earnings for the second quarter of fiscal 2024. The company’s strong industry footing, multi-year charter arrangements, and solid financial performance positions it for bright long-term prospects. The Board declared a dividend of $0.80 per share for the second quarter of 2024 and repurchased 1,671,059 shares of its common stock in the open market for $104.4 million.
Given DAC’s solid financials, accelerating profitability, reliable dividends, and promising growth outlook, this stock could be an ideal buy now.
How Does Danaos Corporation (DAC) Stack Up Against Its Peers?
While DAC has an overall POWR Rating of B, investors could also check out these other stocks within the A-rated Shipping industry with A (Strong Buy) or B (Buy) ratings: BW LPG Limited (BWLP), Overseas Shipholding Group, Inc. (OSG), and Teekay Corporation (TK).
For exploring more A and B-rated shipping stocks, 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.
DAC shares were trading at $84.35 per share on Monday afternoon, up $1.77 (+2.14%). Year-to-date, DAC has gained 16.13%, versus a 18.14% rise in the benchmark S&P 500 index during the same period.
About the Author: Rjkumari Saxena
Rajkumari started her career as a writer but gradually shifted her focus to financial journalism, leveraging her educational background in Commerce. Fascinated by the interplay of business and economic shifts in equities, she aspires to evolve as an analyst. With a knack for simplifying complex financial concepts, her mission is to empower investors with insights that lead to profitable decisions.
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