We use cookies to understand how you use our site and to improve your experience.
This includes personalizing content and advertising.
By pressing "Accept All" or closing out of this banner, you consent to the use of all cookies and similar technologies and the sharing of information they collect with third parties.
You can reject marketing cookies by pressing "Deny Optional," but we still use essential, performance, and functional cookies.
In addition, whether you "Accept All," Deny Optional," click the X or otherwise continue to use the site, you accept our Privacy Policy and Terms of Service, revised from time to time.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
How Should Investors Approach ZIM Stock Amid US-China Trade Dispute?
Read MoreHide Full Article
ZIM Integrated Shipping Services Limited’s (ZIM - Free Report) prospects may be hurt by the ongoing trade dispute between the United States and China. The looming escalation of U.S.-China trade tensions may hamper the operations of this Israel-based shipping company on lucrative routes.
Earlier in the month, President Donald Trump imposed an additional 10% tariff on Chinese imports. In response, China retaliated with tariffs on U.S. products, including a 15% levy on coal and liquefied natural gas and a 10% tariff on crude oil, agricultural machinery and automobiles. The tit-for-tat tariffs have given rise to fears of a trade war.
The escalation of trade tension may dampen ZIM’s earnings potential as the company has significant exposure to both China and the United States. Last year, ZIM launched ZIM Central China Xpress — a new premium service connecting China and Los Angeles. It is offering the industry's fastest transit time via this route, which has been operational since July 3. This route covers the distance from the Chinese city of Ningbo to Los Angeles in only 13 days. However, all this will be hampered badly in the event of escalating traffic disputes between the United States and China.
ZIM’s Disappointing Stock Price Performance
Due to the trade tensions highlighted above, shares of ZIM have lagged the Zacks Transportation—Shipping industry as well as fellow industry playersGlobal Ship Lease (GSL - Free Report) and Star Bulk Carriers (SBLK - Free Report) so far this year.
YTD ZIM Stock Price Comparison
Image Source: Zacks Investment Research
Though the trade tensions induced a disappointing price performance, ZIM’s robust fundamentals can’t be ignored.
Factors Working in Favor of ZIM
Impressive Business Model: 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 it boost profits during high demand.
ZIM’s focus on niche markets and high-margin trade routes helps it avoid 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.
Shareholder-Friendly Approach: 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. Sticking to its policy of returning 30% of net income to its shareholders, in third-quarter 2024, ZIM’s board declared a regular dividend of approximately $340 million or $2.81 per ordinary share. In the process, the shipping company’s quarterly dividend tripled quarter over quarter. Additionally, the board declared a special dividend of approximately $100 million, translating into 84 cents per share. The total payout, therefore, comes in at $3.65 per share.
Impressive Earnings Surprise History: Driven by factors like high revenues and carried volumes, the shipping stock outpaced the Zacks Consensus Estimate for earnings in three of the past four quarters (missing the mark in the other one), with the average beat being 12.6%.
ZIM Integrated Shipping Services Ltd. Price and EPS Surprise
Compelling Stock Valuation: ZIM stock is quite cheap, as its Value Score of A does not suggest a stretched valuation at this moment. In terms of price-to-sales, ZIM is trading at a forward sales multiple of 0.36X, which is lower than industry levels.
Image Source: Zacks Investment Research
How Should Investors Play ZIM Stock Now?
As highlighted above, ZIM has a lot working in its favor, including its attractive valuation. However, the looming escalation of U.S.-China trade tensions does not bode well for stocks like ZIM. The shipping industry, of which ZIM is an integral part, is being hit by growing trade tensions globally. The industry is responsible for a high majority of goods involved in world trade. Trade-related tensions have the potential to slow down goods transportation.
The Wall Street average target price of $18.34 for ZIM stock suggests a downside of over 12% from current levels. This near-term weakness calls for a cautious stance on the stock for now. Therefore, retaining this Zacks Rank #3 (Hold) stock will be prudent for investors who already own it.
Image: Bigstock
How Should Investors Approach ZIM Stock Amid US-China Trade Dispute?
ZIM Integrated Shipping Services Limited’s (ZIM - Free Report) prospects may be hurt by the ongoing trade dispute between the United States and China. The looming escalation of U.S.-China trade tensions may hamper the operations of this Israel-based shipping company on lucrative routes.
Earlier in the month, President Donald Trump imposed an additional 10% tariff on Chinese imports. In response, China retaliated with tariffs on U.S. products, including a 15% levy on coal and liquefied natural gas and a 10% tariff on crude oil, agricultural machinery and automobiles. The tit-for-tat tariffs have given rise to fears of a trade war.
The escalation of trade tension may dampen ZIM’s earnings potential as the company has significant exposure to both China and the United States. Last year, ZIM launched ZIM Central China Xpress — a new premium service connecting China and Los Angeles. It is offering the industry's fastest transit time via this route, which has been operational since July 3. This route covers the distance from the Chinese city of Ningbo to Los Angeles in only 13 days. However, all this will be hampered badly in the event of escalating traffic disputes between the United States and China.
ZIM’s Disappointing Stock Price Performance
Due to the trade tensions highlighted above, shares of ZIM have lagged the Zacks Transportation—Shipping industry as well as fellow industry playersGlobal Ship Lease (GSL - Free Report) and Star Bulk Carriers (SBLK - Free Report) so far this year.
YTD ZIM Stock Price Comparison
Though the trade tensions induced a disappointing price performance, ZIM’s robust fundamentals can’t be ignored.
Factors Working in Favor of ZIM
Impressive Business Model: 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 it boost profits during high demand.
ZIM’s focus on niche markets and high-margin trade routes helps it avoid 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.
Shareholder-Friendly Approach: 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. Sticking to its policy of returning 30% of net income to its shareholders, in third-quarter 2024, ZIM’s board declared a regular dividend of approximately $340 million or $2.81 per ordinary share. In the process, the shipping company’s quarterly dividend tripled quarter over quarter. Additionally, the board declared a special dividend of approximately $100 million, translating into 84 cents per share. The total payout, therefore, comes in at $3.65 per share.
Impressive Earnings Surprise History: Driven by factors like high revenues and carried volumes, the shipping stock outpaced the Zacks Consensus Estimate for earnings in three of the past four quarters (missing the mark in the other one), with the average beat being 12.6%.
ZIM Integrated Shipping Services Ltd. Price and EPS Surprise
ZIM Integrated Shipping Services Ltd. price-eps-surprise | ZIM Integrated Shipping Services Ltd. Quote
Compelling Stock Valuation: ZIM stock is quite cheap, as its Value Score of A does not suggest a stretched valuation at this moment. In terms of price-to-sales, ZIM is trading at a forward sales multiple of 0.36X, which is lower than industry levels.
How Should Investors Play ZIM Stock Now?
As highlighted above, ZIM has a lot working in its favor, including its attractive valuation. However, the looming escalation of U.S.-China trade tensions does not bode well for stocks like ZIM. The shipping industry, of which ZIM is an integral part, is being hit by growing trade tensions globally. The industry is responsible for a high majority of goods involved in world trade. Trade-related tensions have the potential to slow down goods transportation.
The Wall Street average target price of $18.34 for ZIM stock suggests a downside of over 12% from current levels. This near-term weakness calls for a cautious stance on the stock for now. Therefore, retaining this Zacks Rank #3 (Hold) stock will be prudent for investors who already own it.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.