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Zim Integrated Stock Soars 92% in 6 Months: Too Late to Buy the Stock?
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Container liner shipping company ZIM Integrated Shipping Services Ltd. (ZIM - Free Report) continues to benefit from upbeat global trade and container shipping demand. ZIM shares have performed exceedingly well on the bourses, gaining 91.9% over the past six months, handily outperforming its industry and other industry players like Seanergy Maritime Holdings (SHIP - Free Report) and FrontlinePlc (FRO - Free Report) .
Six-Month Share Price Comparison
Image Source: Zacks Investment Research
Technical indicators suggest continued strong performance for ZIM. The stock trades above its 50-day moving average, signaling robust upward momentum and price stability. This technical strength underscores positive market sentiment, and confidence in ZIM’s financial health and prospects.
50-Day Moving Average of ZIM Stock
Image Source: Zacks Investment Research
In view of the surge in ZIM, investors must be wondering if they should lock in profits or buy the stock for more upside potential. Let’s delve into the company’s fundamentals to determine the best course of action.
Red Sea Tensions Boost Freight Rates: A Tailwind for ZIM
ZIM Integrated Shipping, based in Israel, provides service to the East Mediterranean and Israeli ports. The attacks by Yemen’s Houthi militants on vessels in the Red Sea have disrupted maritime trade. As a result, many shipping companies, including ZIM, have hit the pause button as far as transit through this route is concerned and adopted 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 has boosted earnings. Rates are likely to remain high for quite some time, which may translate into further upside potential for shipping stocks like ZIM.
Strong Q2 Results & Upbeat Outlook for ZIM
Last month, ZIM reported better-than-expected earnings per share and revenues for the second quarter of 2024. Revenues increased 48% year over year, driven by an increase in freight rates and carried volume.
ZIM raised its guidance for full-year 2024 adjusted earnings before interest, taxes, depreciation, and amortization or EBITDA. The shipping company expects the metric to be in the range of $2.6-$3 billion. Previously, ZIM anticipated to generate adjusted EBITDA between $1.15 and $1.55 billion.
Additionally, the board declared a cash dividend of approximately $112 million, or 93 cents per ordinary share, sticking to its policy of returning 30% of net income to its shareholders. The shipping company’s quarterly dividend quadrupled quarter over quarter. ZIM’s shareholder-friendly approach throws light on its financial prosperity. The shipping company’s high dividend yield is a huge positive for income-seeking investors. This highlights confidence in its cash flow and prospects.
Further Positives Propelling ZIM Stock
The shipping company’s asset-light model, which means that the focus is more on leasing rather than owning vessels, allows it to adjust capacity rapidly in response to market changes. This practice helps the company to boost profits during periods of high demand.
ZIM’s focus on niche markets and high-margin trade routes helps it avoid the crowded, low-margin segments, thereby maintaining strong pricing power. This, too, aids profitability. The shipping company’s operational efficiency is being aided by investments in digitalization and innovative technologies. This not only boosts ZIM’s bottom line but allows it to take advantage of emerging trends, such as the increased demand for eco-friendly shipping solutions.
Attractive Valuation Adds to ZIM’s Luster
From a valuation standpoint, ZIM stock is trading at a forward 12-month sales multiple of 0.35, lower than the industry as well as the 3-year median. The stock, having a Value Score of A, seems to be undervalued now.
Image Source: Zacks Investment Research
Earnings Estimate Revision Favoring ZIM Stock
Reflecting the positive sentiment around ZIM, the Zacks Consensus Estimate for earnings per share for the remaining quarters of 2024, as well as the full year, has seen upward revisions.
Image Source: Zacks Investment Research
The company’s long-term (3-5 years) earnings growth rate is an impressive 47.4%, higher than its industry’s 23.3%.
Final Verdict
Given the positives surrounding the ZIM stock, as highlighted throughout the write-up, we believe that it’s not too late for investors looking to add ZIM stock to their portfolios for healthy returns. They can still invest in the stock, considering that it currently sports a Zacks Rank #1 (Strong Buy).
Image: Bigstock
Zim Integrated Stock Soars 92% in 6 Months: Too Late to Buy the Stock?
Container liner shipping company ZIM Integrated Shipping Services Ltd. (ZIM - Free Report) continues to benefit from upbeat global trade and container shipping demand. ZIM shares have performed exceedingly well on the bourses, gaining 91.9% over the past six months, handily outperforming its industry and other industry players like Seanergy Maritime Holdings (SHIP - Free Report) and Frontline Plc (FRO - Free Report) .
Six-Month Share Price Comparison
Technical indicators suggest continued strong performance for ZIM. The stock trades above its 50-day moving average, signaling robust upward momentum and price stability. This technical strength underscores positive market sentiment, and confidence in ZIM’s financial health and prospects.
50-Day Moving Average of ZIM Stock
In view of the surge in ZIM, investors must be wondering if they should lock in profits or buy the stock for more upside potential. Let’s delve into the company’s fundamentals to determine the best course of action.
Red Sea Tensions Boost Freight Rates: A Tailwind for ZIM
ZIM Integrated Shipping, based in Israel, provides service to the East Mediterranean and Israeli ports. The attacks by Yemen’s Houthi militants on vessels in the Red Sea have disrupted maritime trade. As a result, many shipping companies, including ZIM, have hit the pause button as far as transit through this route is concerned and adopted 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 has boosted earnings. Rates are likely to remain high for quite some time, which may translate into further upside potential for shipping stocks like ZIM.
Strong Q2 Results & Upbeat Outlook for ZIM
Last month, ZIM reported better-than-expected earnings per share and revenues for the second quarter of 2024. Revenues increased 48% year over year, driven by an increase in freight rates and carried volume.
ZIM raised its guidance for full-year 2024 adjusted earnings before interest, taxes, depreciation, and amortization or EBITDA. The shipping company expects the metric to be in the range of $2.6-$3 billion. Previously, ZIM anticipated to generate adjusted EBITDA between $1.15 and $1.55 billion.
Additionally, the board declared a cash dividend of approximately $112 million, or 93 cents per ordinary share, sticking to its policy of returning 30% of net income to its shareholders. The shipping company’s quarterly dividend quadrupled quarter over quarter. ZIM’s shareholder-friendly approach throws light on its financial prosperity. The shipping company’s high dividend yield is a huge positive for income-seeking investors. This highlights confidence in its cash flow and prospects.
Further Positives Propelling ZIM Stock
The shipping company’s asset-light model, which means that the focus is more on leasing rather than owning vessels, allows it to adjust capacity rapidly in response to market changes. This practice helps the company to boost profits during periods of high demand.
ZIM’s focus on niche markets and high-margin trade routes helps it avoid the crowded, low-margin segments, thereby maintaining strong pricing power. This, too, aids profitability. The shipping company’s operational efficiency is being aided by investments in digitalization and innovative technologies. This not only boosts ZIM’s bottom line but allows it to take advantage of emerging trends, such as the increased demand for eco-friendly shipping solutions.
Attractive Valuation Adds to ZIM’s Luster
From a valuation standpoint, ZIM stock is trading at a forward 12-month sales multiple of 0.35, lower than the industry as well as the 3-year median. The stock, having a Value Score of A, seems to be undervalued now.
Earnings Estimate Revision Favoring ZIM Stock
Reflecting the positive sentiment around ZIM, the Zacks Consensus Estimate for earnings per share for the remaining quarters of 2024, as well as the full year, has seen upward revisions.
Image Source: Zacks Investment Research
The company’s long-term (3-5 years) earnings growth rate is an impressive 47.4%, higher than its industry’s 23.3%.
Final Verdict
Given the positives surrounding the ZIM stock, as highlighted throughout the write-up, we believe that it’s not too late for investors looking to add ZIM stock to their portfolios for healthy returns. They can still invest in the stock, considering that it currently sports a Zacks Rank #1 (Strong Buy).
You can see the complete list of today’s Zacks #1 Rank stocks here.