The increasing need for importing and exporting manufactured goods, transporting raw materials in large quantities, and delivering affordable food products is driving the demand for waterborne freight transportation. Hence, the cargo shipping market is expected to grow from 11.89 billion tons in 2024 to 14.72 billion tons by 2032, exhibiting a CAGR of 2.7%.
Additionally, the shipping container market is estimated to be around $7.75 billion in 2024. The global shipping container market is rapidly evolving due to maritime trade and agreements.
Against this backdrop, let’s compare two Shipping stocks, International Seaways, Inc. (INSW) and Danaos Corporation (DAC), to analyze which shipping stock has smoother sailing ahead.
The Case for International Seaways, Inc. Stock
Valued at $2.58 billion by market cap, International Seaways, Inc. (INSW) owns and operates a fleet of oceangoing vessels for the transportation of crude oil and petroleum products in the international flag trade. It operates in two segments: Crude Tankers and Product Carriers.
INSW’s stock has declined 6.3% over the past month but gained 22.6 % over the past nine months to close the last trading session at $51.83.
In terms of the trailing-12-month net income margin, INSW’s 50.70% is 344.5% higher than the 11.41% industry average. Likewise, its 50.51% trailing-12-month EBITDA margin is 152.3% higher than the industry average of 20.02%. However, its 0.38x trailing-12-month asset turnover ratio is 2% lower than the industry average of 0.50x.
INSW’s total shipping revenues for the second quarter that ended June 30, 2024, were reported at $257.41 million. The company’s adjusted net income and adjusted EPS came in at $118.01 million and $2.37, respectively. Moreover, its adjusted EBITDA stood at $166.96 million.
Street expects INSW’s revenue for the quarter ending September 30, 2024, to decline 5.5% year-over-year to $222.99 million. The company’s EPS for the same quarter is expected to decline 14.9% year-over-year to $1.74. However, the company surpassed consensus revenue estimates in each of the trailing four quarters.
INSW’s POWR Ratings reflect a neutral outlook. The stock has an overall rating of C, which translates to a Neutral in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
It has a C grade for Momentum, Stability, Value, and Sentiment. Within the Shipping industry, it is ranked #29 out of 39 stocks. To see the additional grades of INSW for Growth and Quality, click here.
The Case for Danaos Corporation Stock
Valued at $1.59 billion by market cap, Danaos Corporation (DAC) and its subsidiaries own and operate containerships in Australia, Asia, Europe, and the United States. The company offers seaborne transportation services, such as chartering its vessels to liner companies. The company is based in Piraeus, Greece.
DAC’s stock has gained 16.6% over the past nine months to close the last trading session at $82.04.
In terms of the trailing-12-month EBIT margin, DAC’s 55.77% is 455.2% higher than the 10.05% industry average. Likewise, its 18.95% trailing-12-month Return on Common Equity is 47.9% higher than the 12.81% industry average. Additionally, its 68.09% trailing-12-month EBITDA margin is 393.8% higher than the 13.79% industry average.
During the fiscal second quarter ended June 30, 2024, DAC’s operating revenues increased 2% year-over-year to $246.31 million. Its income from operations was $139.98 million for the quarter. The company’s adjusted net income and adjusted EPS were $132.31 million and $6.78, respectively.
Moreover, as of June 30, 2024, DAC’s cash and cash equivalents stood at $372.45 million, compared to $271.81 million as of December 31, 2023.
Analysts expect DAC’s revenue for the quarter ending September 30, 2024, to increase 5% year-over-year to $251.16 million. Its EPS for the quarter ending December 31, 2024, is expected to increase 5.9% year-over-year to $7.40.
DAC’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, translating to a Buy in our proprietary rating system.
DAC has a B grade for Stability, Momentum, and Quality. It is ranked #14 in the same industry.
Click here for the additional POWR Ratings for DAC (Growth, Value, and Sentiment).
International Seaways vs. Danaos Corporation: Which Shipping Stock Has Smoother Sailing Ahead?
The cargo shipping market is driven by factors such as an increase in international marine freight transport, a rise in demand for cargo transportation through ships, and a surge in trade-related agreements.
Furthermore, automation in marine transportation, an increase in marine safety norms, and the growth of the digital freight forwarding industry create lucrative growth opportunities for the market. Both INSW and DAC stand to capitalize on these burgeoning industry trends. However, DAC’s higher profitability and strong analysts' sentiments favor it as the better shipping stock pick.
Our research shows that the odds of success increase when one invests in stocks with an Overall Rating of Strong Buy or Buy. View all the top-rated stocks in the Shipping industry here.
What To Do Next?
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INSW shares were trading at $51.83 per share on Monday afternoon, up $1.09 (+2.15%). Year-to-date, INSW has gained 20.41%, versus a 19.34% rise in the benchmark S&P 500 index during the same period.
About the Author: Nidhi Agarwal
Nidhi is passionate about the capital market and wealth management, which led her to pursue a career as an investment analyst. She holds a bachelor's degree in finance and marketing and is pursuing the CFA program. Her fundamental approach to analyzing stocks helps investors identify the best investment opportunities.
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