The inflationary pressure, rising interest rates, and the fears of a possible recession have led to a continued fall in freight rates. However, the shipping industry is poised for long-term growth, particularly in emerging and developing economies.
The S&P Global Market Intelligence expects dry bulk rates to remain stable with limited supply and stable trade growth in the upcoming years. The container shipping market is expected to be valued at $11.40 billion by 2027, growing at a CAGR of 8.6%.
Given this backdrop, fundamentally strong shipping stocks Overseas Shipholding Group, Inc. (OSG), Matson, Inc. (MATX), Navigator Holdings Ltd. (NVGS), and Grindrod Shipping Holdings Ltd. (GRIN) could be ideal investments now.
Overseas Shipholding Group, Inc. (OSG)
OSG owns and operates a fleet of oceangoing vessels transporting crude oil and petroleum products in the United States flag trade.
In June, OSG announced a program to purchase up to five million shares of its common stock. The company intends to fund the share repurchase program with excess cash. This should enhance shareholder returns.
OSG’s shipping revenues increased 28% year-over-year to $104 million in the first quarter that ended March 31. Its operating income grew 148.8% from the year-ago value to $7.70 million, while its net cash provided by operating activities improved 119.4% year-over-year to $1.79 million.
The company’s cash, cash equivalents, and restricted cash balance rose 70.2% from its year-ago value to $76.90 million.
The stock has gained 14.9% year-to-date and 5.9% over the past month to close its last trading session at $2.16.
OSG’s POWR Ratings reflect this promising outlook. The company has an overall rating of A, which translates to Strong Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
OSG is rated an A in Momentum and a B in Growth, Sentiment, and Quality. Within the A–rated Shipping industry, it is ranked #2 out of 45 stocks.
To see additional POWR Ratings for Value and Stability for OSG, click here.
Matson, Inc. (MATX)
MATX provides ocean transportation and logistics services. The company’s Ocean Transportation segment offers ocean freight transportation services to the non-contiguous domestic economies, and its Logistics segment offers multimodal transportation brokerage services.
On June 22, MATX declared its third quarter dividend of $0.31 per common share, payable to shareholders on September 1. This represents a 3.3% increase over the prior quarter’s dividend and reflects the company’s shareholder return ability.
MATX’s total operating revenue came in at $1.17 billion for the first quarter that ended March 31, representing a 63.7% year-over-year growth. Its operating income grew 259.9% from the prior-year quarter to $432.60 million, while its net income rose 289% from the same period last year to $339.20 million. The company’s EPS increased 313.6% from the prior-year period to $8.23.
Analysts expect MATX’s revenue for the quarter that ended June 2022 to be $1.20 billion, indicating a 37.3% year-over-year growth. The company’s EPS for the same quarter is expected to increase 122.8% from the prior-year quarter to $8.27. Additionally, MATX has topped consensus EPS estimates in three out of the trailing four quarters, which is impressive.
MATX has gained 17.9% over the past year and 6.1% over the past month to close its last trading session at $77.00.
It is no surprise that MATX has an overall A rating, which translates to Strong Buy in our POWR Rating system.
MATX has a B for Growth, Value, Momentum, and Quality. It is ranked #3 in the Shipping industry.
Beyond what we’ve stated above, we have also given MATX grades for Stability and Sentiment. Get all the MATX ratings here.
Navigator Holdings Ltd. (NVGS)
NVGS is the owner and operator of a fleet of liquefied gas carriers. The company offers international and regional seaborne transportation services for liquefied petroleum gas, petrochemical gases, and ammonia. It is based in London, the United Kingdom.
For the first quarter that ended March 31, NVGS’s total revenues increased 39.7% year-over-year to $119.78 million. Its operating income rose 43.5% from the prior-year quarter to $17.70 million. Its net income and earnings per share came in at $27.39 million and $0.35, up 753.7% and 600%, respectively, from the prior-year period.
Street EPS estimate for the fiscal second quarter (ended June 2022) of $0.22 reflects a rise of 5,057.7% year-over-year. Likewise, Street revenue estimate for the same quarter of $100.62 million indicates an improvement of 63.2% from the prior-year period.
NVGS has gained 13.1% over the past year and 20.4% year-to-date to close its last trading session at $10.68.
It is no surprise that NVGS has an overall B rating, which translates to Buy in our POWR Rating system.
NVGS has an A grade for Momentum and a B for Growth, Stability, Sentiment, and Quality. It is ranked #9 in the same industry.
Click here to see the additional POWR Ratings for NVGS (Value).
Grindrod Shipping Holdings Ltd. (GRIN)
GRIN, based in Singapore, owns, charters in, and operates a fleet of dry bulk carriers and tankers. The company serves shipping companies, mining companies, industrial manufacturing companies, and oil companies.
In May, GRIN announced its contract to sell the 2016-built medium-range product tanker, Matuku, for $30 million and that it had exercised the purchase option on the chartered-in 2015-built supramax bulk carrier, IVS Pinehurst, for $18 million.
The company also announced the extension of the long-term charter on the 2014-built supramax bulk carrier, IVS Crimson Creek, for 11 to 13 months.
GRIN’s revenues came in at $110.29 million for the quarter that ended March 31, representing a 61.2% year-over-year growth. Its gross profit grew 223.1% from the prior-year quarter to $40.70 million, while its adjusted net income for continuing operations rose 1,119.3% from the same period last year to $29.83 million. The adjusted EPS for continuing operations increased 1,100% from the prior-year period to $1.56.
Analysts expect GRIN’s revenue for the fiscal year ending December 2022 to be $508.40 million, indicating an 11.5% year-over-year growth. The company’s EPS for the same year is expected to rise 12.6% from the prior year to $6.63.
GRIN has gained 61.6% over the past year and 6.2% over the past five days to close its last trading session at $16.00.
GRIN has an overall A rating, which translates to Strong Buy in our POWR Rating system.
It has an A grade for Sentiment and a B for Growth, Value, and Momentum. It is ranked #5 in the same industry.
Beyond what we’ve stated above, we have also given GRIN grades for Stability and Quality. Get all the GRIN ratings here.
OSG shares were trading at $2.22 per share on Tuesday afternoon, up $0.06 (+2.78%). Year-to-date, OSG has gained 18.09%, versus a -16.92% rise in the benchmark S&P 500 index during the same period.
About the Author: Anushka Dutta
Anushka is an analyst whose interest in understanding the impact of broader economic changes on financial markets motivated her to pursue a career in investment research.
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