In the aftermath of Russia’s war against Ukraine, oil prices rose to a 14-year record. Although they have retreated from that peak, they still remain at a ten-year high. The obvious winners in this scenario are the world’s largest oil producers, in the US and abroad, who can maintain profits amid lower production – but they are not the only beneficiaries. Companies in the oil transport network have also taken the lead in the past year.
Shipping companies — companies that operate the large tankers that carry crude oil and petroleum products across the world’s ocean routes — have had some of the strongest wins among those second-tier winners. These businesses were under severe pressure in the run-up to the war in Ukraine and reeled from the collapse of shipping costs during the pandemic lockdown period. Russia’s attack on Ukraine, and the resulting reduction in global oil production and supplies, has realigned shipping patterns, and tanker companies are reaping the rewards.
A few of them have even earned the coveted “Perfect 10” from the TipRanks Smart Score, a unique data tool that collects and collects a range of valuable data on all publicly traded stocks – then rates it against 8 known factors. correlate with future overperformance. The score is given on a simple scale of 1 to 10 – with the Perfect 10 indicating a stock that deserves a second look.
A quick look at some numbers shows the magnitude of the gains that have helped earn these stocks their high ratings. Last month, the S&P 500 lost ~6.5% as these two Perfect 10 tankers rose. When you zoom out, the gap is much wider as both names have returned over 200% over the past year. So let’s take a look at these two winners, using a combination of the latest TipRanks data and analyst commentary.
Scorpio Tanker, Inc. (STNG)
First on our list is Scorpio Tanker, a major player on the ocean highways, with a market cap of $5 billion, a fleet of 113 modern tankers and nearly 14 years of experience in the business. Based in Monaco, Scorpio operates its fleet on the charter system to transport oil, refined products and petrochemicals around the world. The company’s fleet leans heavily towards the MR-class tankers, 50,000 DWT vessels, but Scorpio also has 39 of the 110,000-tonne LR2 tankers – and 14 of the smaller 38,000-tonne Handymax vessels that move the less-traveled lanes to smaller navigating ports.
Scorpio released its financial results for 4Q22 and full year 2022 last month, and the results show just how big the recent gains have been. In the fourth quarter, the company posted revenue of $493.7 million, well up from $147.9 million in 4Q21. In the end, Scorpio’s quarterly income of $264.4 million was a strong turnaround from the $46 million loss reported in the prior quarter of the year. Per share, diluted EPS increased from a loss of 79 cents in 4Q21 to a gain of $4.24 in 4Q22.
Looking at the full year, Scorpio’s net income for 2022 was $637.3 million, an increase of 171% over the $234.4 million reported in 2021. Current earnings per share of $10.34 per diluted share represents an even stronger 141% increase from the $4.28 figure in 2021.
Also note that, as another indication of how strong recent earnings and earnings have been, the company announced its regular quarterly dividend with earnings announcement, announcing a payment of 20 cents per common share. The new dividend payment is double that of the previous quarter and marks the first dividend increase in four years.
Three factors stand out as particularly strong on the Smart Score. The stock has 100% positive sentiment from recent news coverage, and the public’s wisdom is “very positive,” with an increase of 15.6% over the past 30 days. And of the hedge funds tracked by TipRanks, positions in STNG rose by more than 754,000 stocks last quarter.
This stock caught the attention of investment bank JPMorgan, which drew attention to itself in a recent post by analyst Sam Bland. Bland pointed to strong demand trends that should support Scorpio’s business going forward: “There is a long-term trend that the trade of oil products by sea is growing faster than crude oil. We expect this variance to persist, based on the geographic mix of demand and expected refinery capacity expansions. We also expect sanctions on Russian exports to add about 5% to the industry’s ton miles. Overall, we expect demand for ton-mile maritime oil products could be about 28% higher in 2025 than in 2018, despite the fact that the volume of global crude oil production has only increased by about 5-10% over that period. increased.”
Shares may be up 231% over the past year, but Bland thinks there’s more room to run. Looking ahead, the analyst rates these stocks as Overweight (a buy), and his $87 price target implies 47% upside potential over a year. (To view Bland’s track record, click here.)
This stock has received 8 recent ratings from The Street’s analysts, with a 7 to 1 split in favor of Buy over Hold for a Strong Buy consensus rating. The shares are priced at $59.27 and their average price target of $75.88 suggests the stock has a 28% gain ahead of it this year. (See Scorpio’s stock forecast on TipRanks.)
Teekay tankers (TNK)
The second stock we’ll look at, Teekay Tankers is a Bermuda-based company and the largest player in the mid-sized tanker niche. Teekay has a fleet of 45 vessels, owned and operated. The backbone of this fleet are 25 Suezmax-sized tankers ranging in DWT from ~150,000 tons to 160,000 tons. The company also has 10 Aframax vessels in the ~110,000 ton class, 9 long rage 2 (LR2) vessels of ~105,000 tonnes each and 1 VLCC (Very Large Crude Carrier) of 319,000 tonnes. This fleet gives Teekay a high degree of operational flexibility when moving oil and oil products, and the company can pride itself on the following: ‘It doesn’t matter where oil is produced or where it needs to go, we get it there safely and reliably On.’
Again, we are looking at a tanker company that saw its sales and profits rise sharply in 2022. The company’s 4Q22 results confirm that; total revenue was $367.3 million for the quarter, a 129% year-over-year gain. This gave the company a net profit of $146.4 million, well above its 4Q21 net loss of $39.8 million. Teekay’s adjusted earnings per share were $4.33 per share; it was a loss of 74 cents in the quarter last year.
For the full year 2022, Teekay had revenue totaling $1.06 billion, up 96% year-over-year. The bottom line for the year came in at $217.1 million, or $6.39 per share. This was a world away from the $138.5 million loss recorded in 2021.
Looking at Teekay’s Smart Score, we again find a stock with 3 standout factors. There’s some very positive crowd wisdom here, based on a 30% increase in the last month, along with an increase of 27,500 stocks in hedge positions in the last quarter. Also the financial bloggers – who are normally a fickle bunch who rarely agree – are 100% bullish in their sentiment on TNK stocks.
In his recent note to DNB Markets, 5-star analyst Jorgen Lian outlines Teekay’s potential course and comes to an optimistic conclusion. Lian writes: “Despite a weaker start to 2023, the recent strength of medium tankers should bode well for spot market exposure, and we estimate an earnings return of around 20% for 2023, with the potential for meaningful shareholder returns as the company has a large cash position. However, we believe the stock is still trading at an attractive discount, which should support the current share price.”
Lian backs up these comments with a Buy rating, and his $52.70 price target indicates a potential for an 18% share valuation over the next 12 months. (To view Lian’s track record, click here.)
In the last 3 months, 5 analysts have reviewed this stock, and their ratings are broken down into 4 Buys and 1 Hold – for a Strong Buy consensus rating. The shares are currently trading for $44.64, and their $53 average price target indicates 18.5% upside from that level. (See Teekay’s stock forecast on TipRanks.)
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Disclaimer: The opinions expressed in this article are solely those of the recommended analysts. The content is for informational purposes only. It is very important to do your own analysis before making an investment.