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Shipping Industry Appreciates 18.6% in a Month: Here's Why
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Shipping companies are responsible for transporting the bulk of the goods involved in world trade. Therefore, the improvement in the demand scenario with respect to goods and commodities from pandemic lows bodes well for this key industry. Riding on the improved demand scenario, most stocks in this key industry had a good time in 2023.
In this write-up, however, we focus on the recent catalyst in the form of tensions in the Red Sea, which have boosted shipping stocks. Notably, the Red Sea is the entry point for ships using the Suez Canal, which handles about 12% of world trade. Suez Canal represents the shortest sea route for the transportation of goods between Asia and Europe. With thousands of ships passing every day, it is an extremely busy and popular trade route.
However, the recent 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.
The reduced container availability due to the Red Sea tensions has resulted in a rise in freight costs. Reportedly, freight costs between Asia and North Europe have surged 173% since mid-December. Lower capacity is expected to boost earnings. These tailwinds are primarily responsible for the Zacks Transportation - Shippingindustry surging 18.6% in the past month, outperforming the S&P 500’s 1.6% rise.
Image Source: Zacks Investment Research
Rates are likely to remain high for quite some time, which may translate into further upside potential for shipping stocks. In view of this rosy backdrop, we highlight three shipping stocks that have gained in double digits in the past month.
A.P. Moller-Maersk (AMKBY - Free Report) , based in Denmark, has had a good run on the bourses recently. AMKBY shares have gained 28.9% over the past month. Due to the Houthi attacks, the Danish company decided to reroute all its shipping vessels away from the Red Sea.
Maersk currently sports a Zacks Rank #1 (Strong Buy). The Zacks Consensus Estimate for 2024 earnings has been revised upward by 87.18% over the past 60 days. Maersk currently has a VGM Score of B. VGM Score helps identify stocks with the most attractive value, best growth and the most promising momentum. Back-tested results have shown that stocks with a VGM Score of A or B combined with a Zacks Rank #1 or #2 (Buy) offer better returns. You can see the complete list of today’s Zacks #1 Rank stocks here.
Global Ship Lease (GSL - Free Report) is headquartered in London. Driven by the Red Sea tensions, shares of the shipping company have gained 13.4% in the past month. GSL currently carries a Zacks Rank #2.
GSL boasts a diversified fleet of mid-sized and smaller containerships. Global Ship Lease currently has a VGM Score of A. The Zacks Consensus Estimate for 2024 earnings has been revised 1.22% upward over the past 60 days.
ZIM Integrated Shipping Services (ZIM - Free Report) is based in Israel. Shares of this shipping company have surged 79.4% in a month’s time. ZIM provides service to the East Mediterranean and Israeli ports.
ZIM currently carries a Zacks Rank #3 (Hold). The Zacks Consensus Estimate for 2024 earnings has been revised 37.14% upward over the past 60 days. ZIM currently has a VGM Score of A.
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Shipping Industry Appreciates 18.6% in a Month: Here's Why
Shipping companies are responsible for transporting the bulk of the goods involved in world trade. Therefore, the improvement in the demand scenario with respect to goods and commodities from pandemic lows bodes well for this key industry. Riding on the improved demand scenario, most stocks in this key industry had a good time in 2023.
In this write-up, however, we focus on the recent catalyst in the form of tensions in the Red Sea, which have boosted shipping stocks. Notably, the Red Sea is the entry point for ships using the Suez Canal, which handles about 12% of world trade. Suez Canal represents the shortest sea route for the transportation of goods between Asia and Europe. With thousands of ships passing every day, it is an extremely busy and popular trade route.
However, the recent 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.
The reduced container availability due to the Red Sea tensions has resulted in a rise in freight costs. Reportedly, freight costs between Asia and North Europe have surged 173% since mid-December. Lower capacity is expected to boost earnings. These tailwinds are primarily responsible for the Zacks Transportation - Shipping industry surging 18.6% in the past month, outperforming the S&P 500’s 1.6% rise.
Image Source: Zacks Investment Research
Rates are likely to remain high for quite some time, which may translate into further upside potential for shipping stocks. In view of this rosy backdrop, we highlight three shipping stocks that have gained in double digits in the past month.
A.P. Moller-Maersk (AMKBY - Free Report) , based in Denmark, has had a good run on the bourses recently. AMKBY shares have gained 28.9% over the past month. Due to the Houthi attacks, the Danish company decided to reroute all its shipping vessels away from the Red Sea.
Maersk currently sports a Zacks Rank #1 (Strong Buy). The Zacks Consensus Estimate for 2024 earnings has been revised upward by 87.18% over the past 60 days. Maersk currently has a VGM Score of B. VGM Score helps identify stocks with the most attractive value, best growth and the most promising momentum. Back-tested results have shown that stocks with a VGM Score of A or B combined with a Zacks Rank #1 or #2 (Buy) offer better returns. You can see the complete list of today’s Zacks #1 Rank stocks here.
Global Ship Lease (GSL - Free Report) is headquartered in London. Driven by the Red Sea tensions, shares of the shipping company have gained 13.4% in the past month. GSL currently carries a Zacks Rank #2.
GSL boasts a diversified fleet of mid-sized and smaller containerships. Global Ship Lease currently has a VGM Score of A. The Zacks Consensus Estimate for 2024 earnings has been revised 1.22% upward over the past 60 days.
ZIM Integrated Shipping Services (ZIM - Free Report) is based in Israel. Shares of this shipping company have surged 79.4% in a month’s time. ZIM provides service to the East Mediterranean and Israeli ports.
ZIM currently carries a Zacks Rank #3 (Hold). The Zacks Consensus Estimate for 2024 earnings has been revised 37.14% upward over the past 60 days. ZIM currently has a VGM Score of A.