The rising demand for commodities amid fast-paced global macroeconomic recovery has resulted in high demand for shipping. Container shipping rates have rallied to record highs in the second quarter of 2021 and are expected to remain at lofty levels for the rest of the year.
The industry is projected to generate operating profits of nearly $35 billion in 2021. The continuing high levels of demand and steady increase in both spot and contract rates are expected to boost the shipping industry substantially in the near term.
Given this backdrop, we think of Wall Street analysts’ favorites, Genco Shipping & Trading Limited (GNK), Navios Maritime Partners L.P. (NMM), Euroseas Ltd. (ESEA), and EuroDry Ltd. (EDRY), could be solid additions to one’s portfolio.
Genco Shipping & Trading Limited (GNK)
GNK, together with its subsidiaries, provides the ocean transportation of dry bulk cargoes worldwide. Through the ownership and operation of dry bulk carrier vessels, the New York City-based company transports iron ore, coal, grains, steel products, and other dry-bulk cargoes.
On May 19, GNK announced an agreement to acquire two 2022-built 61,000 dwt Ultramax vessels. These purchases mark the fifth and sixth high specification, fuel-efficient Ultramax vessels that Genco has agreed to acquire since December 2020. This expansion of its fleet should allow the company to benefit from robust freight rates leading to attractive returns on capital.
Drybulk freight rates reached multi-year highs during the second quarter of 2021, owing to increased global economic activity, recovering steel production, and augmented demand for drybulk commodities. These factors improved the company’s financials significantly.
GNK’s total revenues increased 63.1% year-over-year to $121.01 million in its fiscal second quarter, ended June 30, due primarily to the higher rates achieved by both of its major and minor bulk vessels, as well as its third-party time chartered-in vessels. Its operating profit grew 376.6% from its year-ago value to $36.25 million. GNK’s net income came in at $32.04 million, indicating a 276% rise year-over-year. The company’s EPS increased 274.4% year-over-year to $0.75.
The Street expects GNK’s revenues to rise 128.2% year-over-year to $120.98 million in the current quarter, ending September 2021. A $1.30 consensus EPS estimate for the current quarter indicates a 4,233.3% improvement year-over-year. Also, the company beat the consensus EPS estimates in three out of the trailing four quarters. Shares of GNK have gained 169.6% in price over the past year and 163% year-to-date.
Among the four Wall Street analysts that rated GNK, three rated it Buy while one rated it Hold. The median price target of $27.00 indicates a potential 39.5% upside from its last closing price of $19.36. The 12-month price targets range from a low of $24.00 to a high of $29.00.
GNK has an A grade for Growth, and a B for Momentum in our POWR Ratings system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree. Among the 47 stocks in the Shipping industry, GNK is ranked #15.
To see more of GNK’s component grades, click here.
Navios Maritime Partners L.P. (NMM)
NMM, which is headquartered in Monte Carlo, Monaco, owns and operates dry cargo vessels in Asia, Europe, North America, and Australia. The company offers seaborne transportation services for a range of dry cargo commodities, including iron ore, coal, grain, fertilizers, containers, and charters its vessels under medium- to long-term charters.
On June 29, NMM announced its agreement to acquire five drybulk vessels (four Capesize and one Kamsarmax) for approximately $182.3 million. These additions to its lineup are expected to enhance its operational capabilities and help the company to generate significant returns.
NMM’s revenue increased 226.6% year-over-year to $152 million in its fiscal second quarter, ended June 30. This increase was mainly attributable to the increase in its fleet size and rise in the Time Charter Equivalent rate. Its adjusted net income grew 1,374.2% from its year-ago value to $99.91 million, while its net cash provided by operating activities increased 128.4% year-over-year to $61.07 million over the period. The company’s adjusted EPS increased 707% year-over-year to $4.31.
A $189.91 million consensus revenue estimate for its fiscal third quarter, ending September 2021, indicates a 213.7% improvement from the same period last year. Analysts expect the company’s EPS to be $3.03 in the current quarter, representing a 288.5% rise year-over-year. Also, NMM surpassed the Street’s EPS estimates in three of the trailing four quarters.
NMM has gained 133.8% in price year-to-date. The stock gained 316.2% over the past year to close yesterday’s trading session at $26.18.
The median price target of $43.00 indicates a potential 64.3% upside from its last closing price.
The company has an overall B rating, translating to Buy in our proprietary rating system. In addition, NMM has a B grade for Growth, Value, Momentum, and Sentiment. It is ranked #8 in the Shipping industry.
Beyond what we’ve stated above, we have also rated NMM for Quality and Stability. Click here to view all NMM ratings.
Euroseas Ltd. (ESEA)
ESEA provides ocean-going transportation services worldwide. The company owns and operates containerships that transport dry and refrigerated containerized cargoes, including manufactured products and perishables. It is based in Marousi, Greece.
On August 2, ESEA announced a new charter contract for its container vessel M/V “EM Spetses.” The company expects this new charter to generate a minimum of $31 million of contracted revenues and a minimum EBITDA of approximately $24 million. ESEA also plans to introduce four more ships to its fleet by the end of this year.
For the second quarter, ended June 30, the company reported $18.29 million in total net revenues, representing a 35.4% increase year-over-year. This can be attributed to increased market charter rates that its vessels earned in the second quarter of 2021 versus the same period of 2020. Its operating income grew 202.2% from its year-ago value to $8.74 million, while its net income improved 515.9% year-over-year to $7.95 million. The company’s EPS increased 455% year-over-year to $1.11.
Analysts expect ESEA’s revenues to increase 55.9% year-over-year to $83.08 million in the current year. A $4.76 consensus EPS estimate for the current year indicates a 720.7% rise from the last year. In addition, the company surpassed the Street’s EPS estimates in each of the trailing four quarters. Shares of ESEA have gained 828.5% over the past year and 332.6% year-to-date.
The $34.00 median price target a potential 44.7% gain from its last closing price of $23.49. The 12-month price targets range from a low of $30.00 to a high of $38.00.
It is no surprise that ESEA has an overall B rating, which equates to Buy in our proprietary POWR Ratings system. The stock has a grade of A for Growth, and a B for Momentum, Sentiment, and Quality. It is ranked #10 in the Shipping industry.
To see additional ESEA ratings for Value and Stability, click here.
EuroDry Ltd. (EDRY)
Based in Greece, EDRY provides ocean-going transportation services worldwide. The company owns and operates dry bulk carriers that transport major bulk cargoes, such as iron ore, coal, grains, and minor bulks, including bauxite, phosphate, and fertilizers.
On August 23, EDRY announced that it has agreed to acquire M/V Asia Ruby II, a 62,996 dwt drybulk vessel built-in 2014, for $24.5 million. The company expects this acquisition to significantly contribute to its net income and EBITDA amid the favorable charter rates.
EDRY’s revenue increased 250.7% year-over-year to $14.09 million in its fiscal second quarter ended June 30. Its operating income stood at $8.08 million, up 374.5% from the same period last year. Its net income increased 158% from its year-ago value to $2.22 million. The company’s EPS increased 143.5% year-over-year to $0.81.
A $16.90 million consensus revenue estimate for its fiscal third quarter (ending September 2021) indicates a 148.7% increase year-over-year. The Street expects the company’s EPS to rise 5,900% from the prior-year quarter to $3.60 in the current quarter.
Over the past year, EDRY has gained 634% in price to close yesterday’s trading session at $27.60. The stock has gained 403.7% year-to-date.
The $41.50 median price target indicates a potential 50.4% upside from its last closing price. The 12-month price targets range from a low of $35.00 to a high of $48.00.
EDRY has an overall B rating, which equates to Buy in our proprietary POWR Ratings system. EDRY has an A grade for Growth and Sentiment, and B for Momentum and Quality. It is ranked #6 in the Shipping industry.
Click here to view additional EDRY ratings for Value and Stability.
GNK shares were trading at $19.56 per share on Thursday afternoon, up $0.20 (+1.03%). Year-to-date, GNK has gained 168.58%, versus a 20.13% rise in the benchmark S&P 500 index during the same period.
About the Author: Subhasree Kar
Subhasree’s keen interest in financial instruments led her to pursue a career as an investment analyst. After earning a Master’s degree in Economics, she gained knowledge of equity research and portfolio management at Finlatics.
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