This is a challenging time for the global shipping industry. On the one hand, demand for products in many categories continues to grow, with a recent report suggesting that the industry will grow at a CAGR of nearly 5% over the next seven years; on the other hand, an increasingly uncertain trade situation could increase costs and force changes in routes and other operations in 2025.
Several major shipping companies are at or near 52-week lows, which could present a buying opportunity, while shares are relatively cheap for investors bullish on prospects in the new year and beyond. Among these profitable firms are companies such as Hafnia Ltd. New York Stock Exchange: HAFN and Frontline PLC New York Stock Exchange: FROtwo global shipping companies whose shares fell 10.5% and 26.0% respectively in the year to December 12, 2024.
If these companies’ stock prices have declined in recent months, why might investors be paying attention to them now? Revenue growth is the key factor. Both Hafnia and Frontline are above, as well as their competitor Seanergy Maritime Holdings Corp. NASDAQ: SHIP lagged 12-month earnings growth at the top of the shipping industry. These three companies are already ahead of their peers by this measure, and if the shipping industry gains momentum as some analysts predict, they could be among the biggest beneficiaries.
Hafnia: buyback of shares from analysts’ favorite
Hafnia today
(As of 12/13/2024 ET)
- 52 week range
- $5.13
▼
$8.99
- Dividend yield
- 27.86%
- P/E ratio
- 3.19
- Target price
- US$9.00
Hafnia is a Bermuda-based oil tanker company specializing in the trading of clean petroleum products or the supply of refined, “lighter” products such as gasoline. The organic trade typically uses a different type of vessel than for so-called “heavier” products such as crude oil, allowing firms like Hafnia to differentiate themselves from many of their competitors.
However, crude oil tankers may be entering the clean trade and their influx in recent months may have contributed to a significant drop in freight rates and a subsequent sell-off in HAFN shares, which fell further. more than a third in the six months leading up to December 12, 2024.
Hafnia’s executives decided now was the right time to reallocate capital toward share buybacks instead of dividends to shareholders. On December 2, the company launched a short-term buyback program that will only last until the end of January and covers stock purchases totaling up to $100 million. Buybacks will improve the dividend yield for shareholders in the future and will also help increase cash yield.
HAFN’s 12-month year-on-year revenue growth of 52.2% also contributed to analyst interest. The company currently has a Buy rating, with nearly 90% upside potential from the current share price.
Front line: strong prospects
Front line today
(As of 12/13/2024 ET)
- 52 week range
- $13.71
▼
$29.39
- Dividend yield
- 9.57%
- P/E ratio
- 5.80
- Target price
- $25.36
Frontline’s 12-month year-on-year revenue performance is even better than Hafnia’s, as the company’s revenue grew 83% over the period. However, the company’s stock prices fell after the company missed analysts’ forecasts in its third-quarter earnings report earlier in the fall, despite growth from the prior-year quarter. Revenue of more than $490 million actually beat analysts’ expectations despite lower spot contract prices.
Frontline, a global firm and one of the world’s largest shipping companies, is deeply influenced by geopolitics. With oil-exporting countries in the Middle East holding back more production as a result of rising domestic demand as well as weaker demand in Asia, Frontline has faced headwinds in recent months.
However, despite the share price decline, Frontline now stands out as a value proposition for investors with a longer investment horizon. The firm has a P/S ratio of just 1.5 and a forward P/E ratio of 7.5.
Seanergy: high dividend yield, expected demand growth
Seanergy Maritime today
Seanergy Maritime
(As of 12/13/2024 ET)
- 52 week range
- $6.94
▼
$13.19
- Dividend yield
- 13.68%
- P/E ratio
- 3.12
- Target price
- $12.50
Seanergy is a large dry cargo shipping company operating a fleet of Capesize tankers. The firm has long attracted dividend investors thanks to its 14.2% dividend yield, but has seen renewed interest recently thanks to better-than-expected earnings results and a dividend increase.
Expected continued growth in iron ore demand globally, and particularly in Asia, is likely to support further revenue growth for the company, which already has a 12-month YoY revenue growth of 66.3%.
These factors contributed to analysts’ decision to call Seanergy a Strong Buy, with 70.8% upside potential from current price levels.
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