ZIM Integrated Shipping Services (NYSE:ZIM) shares are heading towards a negative finish for the week, after experiencing a 20% decline throughout the week. The latest quarterly report from the Israeli container shipping company failed to generate enthusiasm among investors, contributing to the downward trend.
Specifically, revenue declined by a big 63.2% year-over-year to $1.37 billion, while missing the Street’s forecast by $220 million. There wasn’t much luck at the end of the scale, either, as EPS of -$0.50 fell short of the -$0.22 the analysts were looking for.
The company’s average freight rate per TEU (twenty-foot equivalent unit) hit $1,390, a 64% drop from the $3,848 generated in the same period a year ago. The result of which was a net loss of $58 million compared to a $1.7 billion profit in 1Q22.
Making matters worse, after six straight quarters of payouts, due to the net loss, the company announced a halt to its dividend payments.
On a bright note, the company stuck to its adjusted EBITDA outlook of $1.8–$2.2 billion and adjusted EBIT forecast of $100–$500 million for 2023.
For J.P. Morgan analyst Samuel Bland, that guide assumes a “recovery in rates/volumes in H2,” although the analyst believes that “having strong confidence in this is difficult.”
Nevertheless, while Bland is reluctant to get too confident, he points out the stock’s retreat might just be too aggressive.
“At the margin, we tend to think the current share price may be too pessimistic, with the pace of earnings decline likely to slow from here,” Bland explained. “We expect the profit gap between ZIM and peers to close in the coming months, as contracted rate benefits at peers decline and ZIM’s cost base is gradually reduced as expensive charters are redelivered.”
“At the same time the industry does not yet seem to have reached a bottom,” Bland concluded, “and a weak industry environment may persist for 2-3 years, judging from expected supply growth.”
As such, Bland rates ZIM shares a Neutral, along with a $17.80 price target. That figure still makes room for 12-month returns of ~49%. (To watch Bland’s track record, click here)
Overall, the Street’s view on ZIM presents a strange conundrum. On the one hand, based on 3 Holds and 2 Sells, the cargo shipping stock has a Moderate Sell consensus rating. However, the average price target of $18.36 represents possible upside of nearly 32%. It will be…
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