Chalk it up as another one of those pandemic surprises: Shipping companies, such as Matson NYSE: MATX
, ZIM Integrated Shipping Services NYSE: ZIM
and Danaos NYSE: DAC
are among the fastest-moving stocks these days.
Container shippers, buried deep into the usually sleepy industrials sector, don’t get the attention paid to techs or retailers. But they’re on the move. As online ordering picked up over the past year, these companies have been busy delivering items around the world.
Of course, the majority of items come from China, but they originate from other global ports, as well.
Americans are well aware that government stimulus checks give people more money to put back into the economy, often with purchases. However, other governments provided citizens with financial assistance during the pandemic.
All this adds up to shipping companies riding high on the seas.
Small, Speedy Vessels
If you’ve visited Hawaii, you may have seen Matson containers and trucks everywhere. The Honolulu-based company specializes in logistics and shipping to Hawaii, Alaska, Guam, Micronesia and the South Pacific. It also has a mainland presence with its premium, expedited service directly from China to Southern California.
Matson has developed a fleet of smaller ships that can transport goods faster than on bigger vessels. The company commands top dollar for that service.
Matson’s stock price has also sped higher, gaining 18.33% year-to-date and 124.57% over the past year.
The stock closed Thursday at $67.18, down 15% from its February 24 high of $79.05. It’s not unusual that a stock would retreat 15% after a 10-month run-up. A pullback gives some institutional investors a chance to buy in at a lower price, when others pare their positions.
It’s not just the price that’s been on a tear during the pandemic. Earnings growth accelerated over the past three quarters, and year-over-year revenue turned higher in the past two, following at least six quarters of declining revenue.
Israel’s ZIM went public on January 28. The company hoped to raise between $300 and $500 million in its public debut.
The IPO raised just over $217 million, with shares priced at $15 apiece, below the planned-for range of $16 to $19. Shares closed at $11.50 on its first day of trading.
ZIM said it would use the proceeds for a variety of projects, including new vessels and containers and digital infrastructure.
Despite some disappointment with the IPO, the stock is faring well so far. Its market capitalization has risen to $3.2 billion as the stock climbed. The stock is up 131% since its opening day; it closed Thursday at $26.65.
The company falls under the “asset-light” category of transporter. That’s because it owns just one ship and charters other vessels. It specializes in niche routes around the globe.
ZIM’s earnings per share were $3.04 in the most recent quarter, a turnaround from a loss of $0.01 per share in the year-earlier quarter. Revenue was $1.36 billion, a 64% year-over-year increase.
The stock still shows volatile intraday trading, but that may change as it develops more of a trading history and attracts more institutional money. It’s very common for new IPOs to rally higher, then pull back, often for an extended period. Investors should be prepared for that possibility.
Earnings Turn Higher
Greek shipper Danaos is working on its eighth month in a row of upside trade.
The company charters its fleet of container ships to other transporters.
Its year-to-date return is 140.22%, and its one-year return is an almost unbelievable 1,354.24%. The stock closed Thursday at $51.48.
Earnings growth turned around in the latest quarter. The company has been profitable for many years, but year-over-year earnings were declining. Danaos reported earnings per share of $2.29 in the fourth quarter, up 14% from the year-earlier quarter.
Revenue was $119.6 million, up 9% from the year earlier.
In the company’s earnings conference call on February 16, CEO John Coustas said, “In the fourth quarter of 2020, we witnessed the most outstanding turnaround in the container industry for as long as I can remember. Market participants were caught by surprise as the chronic underinvestment in capacity coupled with a sudden resurgence of demand created a spike that drove container box rates to all-time highs.”
The stock’s current rally began in August. It’s currently at multiyear highs, and extended beyond a proper buy point. Investors should watch for a new base to form, as institutional investors take profits, setting the stage for new buyers to enter at a lower price.
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