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3 Shipping Stocks to Watch on Favorable Industry Trends
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The Zacks Transportation - Shipping industry is being aided by an improvement in the demand for goods and commodities from the pandemic lows. Moreover, the tensions in the Red Sea and the resultant limited container availability have increased freight costs. The re-opening of the China economy has also boosted the industry participants. A strong outlook for the Capesize market also bodes well for shipping stocks.
In the prevalent scenario, we believe that investors would do well to keep a tab on Kirby Corporation (KEX - Free Report) , Golar LNG (GLNG - Free Report) and Costamare (CMRE - Free Report) .
Industry Overview
The companies belonging to the Zacks Transportation - Shipping industry, which is cyclical in nature, offer liquefied natural gas and crude oil marine transportation services under long-term, fixed-rate contracts with energy and utility bigwigs. Most participants focus on the seaborne transportation of crude oil and other oil products, globally. The industry also includes players that own, operate and manage liquefied natural gas carriers. Some participants are owners and operators of containerships for charter. The change in the e-commerce landscape due to the coronavirus impact implies that shippers are relying more on third-party logistics providers. The well-being of the industry participants is directly proportional to the health of the economy. The resumption of economic activities after coming to a standstill during COVID-19 bodes well.
3 Key Investing Trends to Watch in the Transportation-Shipping Industry
Red Sea Tensions Boost Freight Rates: The attacks by Yemen’s Houthi militants on vessels in the Red Sea have disrupted maritime trade. As a result, many shipping companies have hit the pause button as far as transit through this route is concerned. Keeping the safety of their crew in mind, they are adopting the longer and costlier route around the Cape of Good Hope in South Africa rather than through the Suez Canal. Reduced container availability due to the Red Sea tensions has resulted in a rise in freight costs. Lower capacity is expected to boost earnings. Rates are likely to remain high for quite some time, which may translate into further upside potential for shipping stocks.
Upbeat FLNG Market: The floating LNG or liquefied natural gas market is growing due to its economic viability and is expected to display significant capacity growth, particularly in Africa and North America. The global FLNG market, valued at $19.2 billion in 2022, is projected to reach $51.6 billion by 2032, at a CAGR of 10.8% in the 2023-2032 timeframe. Factors like low unit costs, standardized designs and improving demand for quick-to-market LNG supply are driving growth.
Improving Capesize Market Sentiment: Factors like a build-up of iron ore inventories in China have resulted in higher capesize freight rates. In fact, with the reopening of the Chinese economy, the entire shipping industry heaved a sigh of relief. Ocean shipping is hugely dependent on China. This is because China is not only a key manufacturing hub but also sees significant high demand for goods and services, courtesy of the country’s large population.
Zacks Industry Rank Indicates Bright Prospects
The Zacks Transportation - Shipping industry lies within the broader Zacks Transportation sector. The industry currently carries a Zacks Industry Rank #46, which places it in the top 18% of 245 plus Zacks industries.
The group’s Zacks Industry Rank, basically the average of the Zacks Rank of all the member stocks, indicates encouraging near-term prospects. Our research shows that the top 50% of the Zacks-ranked industries outperforms the bottom 50% by a factor of more than 2 to 1.
Before we present a few stocks that you may want to retain/add to your portfolio, let’s look at the industry’s recent stock-market performance and its valuation picture.
Industry Outperforms S&P 500 and Sector
The Zacks Transportation - Shipping industry has outperformed the Zacks S&P 500 composite index and the broader sector over the past year.
Over this period, the industry has gained 54.6% compared with the S&P 500 Index’s northward movement of 27.7%. The broader sector has declined 2.4% in the same timeframe.
One-Year Price Performance
Industry's Current Valuation
Based on the forward 12-month price-to-sales (P/S- F12M), a commonly used multiple for valuing shipping stocks, the industry is currently trading at 2.57X, compared with the S&P 500’s 5.28X. It is above the sector’s P/S (F12) reading of 1.8X.
Over the past five years, the industry has traded as high as 3.16X, as low as 1.06X and at the median of 1.55X.
P/S Ratio (Forward 12-Month)
3 Transportation -Shipping Stocks to Keep a Tab On
Costamare owns containerships that are chartered to liner companies. The company deploys its containership fleet principally under multi-year time charters with leading liner companies that operate regularly scheduled routes between large commercial ports.
CMRE currently sports a Zacks Rank #1 (Strong Buy). CMRE shares are being aided by the improvement in market sentiment about the dry bulk sector. Owing to the bullishness surrounding the dry bulk sector, CMRE shares have gained 55% year to date.
Kirby is being well-served by increased demand in its distribution and services segment. Favorable market conditions at its marine transportation unit are encouraging as well. KEX currently carries a Zacks Rank #2 (Buy).
The optimism surrounding the stock can be gauged from the fact that KEX shares gained 53% year to date. Over the past 60 days, the Zacks Consensus Estimate for 2024 earnings has moved almost 1.5% north.
Price and Consensus: KEX
Hamilton, Bermuda-based Golar LNG is the sole provider of floating LNG as a service. GLNG ranks first in terms of FLNG capacity. Growth of the FLNG market bodes well for GLNG.
The stock has gained 46.2% year to date. Currently, carrying a Zacks Rank #3 (Hold), GLNG has seen the Zacks Consensus Estimate for 2024 earnings being revised 13.9% upward over the past 60 days.
Price and Consensus: GLNG
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3 Shipping Stocks to Watch on Favorable Industry Trends
The Zacks Transportation - Shipping industry is being aided by an improvement in the demand for goods and commodities from the pandemic lows. Moreover, the tensions in the Red Sea and the resultant limited container availability have increased freight costs. The re-opening of the China economy has also boosted the industry participants. A strong outlook for the Capesize market also bodes well for shipping stocks.
In the prevalent scenario, we believe that investors would do well to keep a tab on Kirby Corporation (KEX - Free Report) , Golar LNG (GLNG - Free Report) and Costamare (CMRE - Free Report) .
Industry Overview
The companies belonging to the Zacks Transportation - Shipping industry, which is cyclical in nature, offer liquefied natural gas and crude oil marine transportation services under long-term, fixed-rate contracts with energy and utility bigwigs. Most participants focus on the seaborne transportation of crude oil and other oil products, globally. The industry also includes players that own, operate and manage liquefied natural gas carriers. Some participants are owners and operators of containerships for charter. The change in the e-commerce landscape due to the coronavirus impact implies that shippers are relying more on third-party logistics providers. The well-being of the industry participants is directly proportional to the health of the economy. The resumption of economic activities after coming to a standstill during COVID-19 bodes well.
3 Key Investing Trends to Watch in the Transportation-Shipping Industry
Red Sea Tensions Boost Freight Rates: The attacks by Yemen’s Houthi militants on vessels in the Red Sea have disrupted maritime trade. As a result, many shipping companies have hit the pause button as far as transit through this route is concerned. Keeping the safety of their crew in mind, they are adopting the longer and costlier route around the Cape of Good Hope in South Africa rather than through the Suez Canal. Reduced container availability due to the Red Sea tensions has resulted in a rise in freight costs. Lower capacity is expected to boost earnings. Rates are likely to remain high for quite some time, which may translate into further upside potential for shipping stocks.
Upbeat FLNG Market: The floating LNG or liquefied natural gas market is growing due to its economic viability and is expected to display significant capacity growth, particularly in Africa and North America. The global FLNG market, valued at $19.2 billion in 2022, is projected to reach $51.6 billion by 2032, at a CAGR of 10.8% in the 2023-2032 timeframe. Factors like low unit costs, standardized designs and improving demand for quick-to-market LNG supply are driving growth.
Improving Capesize Market Sentiment: Factors like a build-up of iron ore inventories in China have resulted in higher capesize freight rates. In fact, with the reopening of the Chinese economy, the entire shipping industry heaved a sigh of relief. Ocean shipping is hugely dependent on China. This is because China is not only a key manufacturing hub but also sees significant high demand for goods and services, courtesy of the country’s large population.
Zacks Industry Rank Indicates Bright Prospects
The Zacks Transportation - Shipping industry lies within the broader Zacks Transportation sector. The industry currently carries a Zacks Industry Rank #46, which places it in the top 18% of 245 plus Zacks industries.
The group’s Zacks Industry Rank, basically the average of the Zacks Rank of all the member stocks, indicates encouraging near-term prospects. Our research shows that the top 50% of the Zacks-ranked industries outperforms the bottom 50% by a factor of more than 2 to 1.
Before we present a few stocks that you may want to retain/add to your portfolio, let’s look at the industry’s recent stock-market performance and its valuation picture.
Industry Outperforms S&P 500 and Sector
The Zacks Transportation - Shipping industry has outperformed the Zacks S&P 500 composite index and the broader sector over the past year.
Over this period, the industry has gained 54.6% compared with the S&P 500 Index’s northward movement of 27.7%. The broader sector has declined 2.4% in the same timeframe.
One-Year Price Performance
Industry's Current Valuation
Based on the forward 12-month price-to-sales (P/S- F12M), a commonly used multiple for valuing shipping stocks, the industry is currently trading at 2.57X, compared with the S&P 500’s 5.28X. It is above the sector’s P/S (F12) reading of 1.8X.
Over the past five years, the industry has traded as high as 3.16X, as low as 1.06X and at the median of 1.55X.
P/S Ratio (Forward 12-Month)
3 Transportation -Shipping Stocks to Keep a Tab On
Costamare owns containerships that are chartered to liner companies. The company deploys its containership fleet principally under multi-year time charters with leading liner companies that operate regularly scheduled routes between large commercial ports.
CMRE currently sports a Zacks Rank #1 (Strong Buy). CMRE shares are being aided by the improvement in market sentiment about the dry bulk sector. Owing to the bullishness surrounding the dry bulk sector, CMRE shares have gained 55% year to date.
Price and Consensus: CMRE
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here
Kirby is being well-served by increased demand in its distribution and services segment. Favorable market conditions at its marine transportation unit are encouraging as well. KEX currently carries a Zacks Rank #2 (Buy).
The optimism surrounding the stock can be gauged from the fact that KEX shares gained 53% year to date. Over the past 60 days, the Zacks Consensus Estimate for 2024 earnings has moved almost 1.5% north.
Price and Consensus: KEX
Hamilton, Bermuda-based Golar LNG is the sole provider of floating LNG as a service. GLNG ranks first in terms of FLNG capacity. Growth of the FLNG market bodes well for GLNG.
The stock has gained 46.2% year to date. Currently, carrying a Zacks Rank #3 (Hold), GLNG has seen the Zacks Consensus Estimate for 2024 earnings being revised 13.9% upward over the past 60 days.
Price and Consensus: GLNG