Despite a significant supply and demand imbalance, exacerbated by a strained global supply chain amid the COVID-19 pandemic, most shipping operators have been witnessing solid demand lately. Investors’ interest in the shipping stocks is evident from the Breakwave Dry Bulk Shipping ETF’s (BDRY) 12.2% gain over the past month compared to the SPDR S&P 500 ETF’s (SPY) 0.8% loss.

Moreover, record freight rates due to solid post-pandemic global demand for manufactured goods are helping shipping companies expand their profit margins. The most recent surge in pricing of containers comes on the back of the Suez Canal blockage in March, which tied up approximately 321 ships for 14 days. According to a report by Grand View Research, the global shipping container market size is expected to expand at a CAGR of 12% from 2020 to 2028.

Given this backdrop, it could be wise to bet on fundamentally sound shipping companies ZIM Integrated Shipping Services Ltd. (ZIM), Danaos Corporation (DAC), Euroseas Ltd. (ESEA), and EuroDry Ltd. (EDRY) that are already rallying. Plus, they are rated ‘Buy’ in our proprietary POWR Ratings system and have plenty of upside left.

ZIM Integrated Shipping Services Ltd. (ZIM)

Headquartered in Haifa, Israel, ZIM provides container shipping and related services and operates 101 vessels with a global network of 69 weekly lines. In addition, the company offers seaborne transportation and logistics services comprising dry, reefer, project, out of gauge, breakbulk and dangerous cargo services.

On June 21, ZIM and Alibaba.com (BABA) announced extending their cooperation agreement for two more years. Eli Glickman, ZIM’s President and CEO, said, “It is part of our innovative strategic vision, and we are very proud to extend and expand this partnership with Alibaba.com to enhance the customer experience and further capitalize on growing eCommerce trends."

ZIM’s revenues increased 200% year-over-year to $2.38 billion for the fiscal second quarter that ended June 30, 2021. The company’s adjusted EBITDA grew 820% year-over-year to $1.34 billion, while its net income increased 3,452% year-over-year to $888 million. Also, its adjusted EPS came in at $7.38, up 3,108.7% year-over-year.

ZIM’s EPS is expected to be $25.83 in fiscal 2021, representing a 414.5% year-over-year increase. In addition, the company’s revenue is expected to increase 173.6% year-over-year to $2.77 billion for the quarter ending September 30, 2021. Over the past six months, the stock has gained 111.6% to close yesterday’s trading session at $55.10.

ZIM’s POWR Ratings reflect this promising outlook. The company has an overall grade of B, which translates into a Buy rating in our proprietary ratings system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.

The stock has a B grade for Growth, Value, Momentum, and Quality. Within the Shipping industry, ZIM is ranked #4 out of 49 stocks. To see additional grades for ZIM (Stability and Sentiment), click here.

Danaos Corporation (DAC)

Based in Piraeus, Greece, DAC owns and operates 65 containerships aggregating 403,793 twenty-foot equivalent units in capacity across Australia, Asia, Europe, and the United States. The company offers seaborne transportation services, such as chartering its vessels to liner companies.

On July 14, DAC announced that it has agreed to acquire six 5,466 TEU container vessels built at Hanjin Subic Bay shipyard en bloc for $260 million. This acquisition is expected to increase the company's contracted revenue by approximately $71 million and the company's contracted EBITDA by roughly $39 million in total.

DAC’s operating revenues increased 25.3% year-over-year to $146.43 million for the fiscal second quarter that ended June 30, 2021. The company’s adjusted EBITDA grew 29.5% year-over-year to $103.74 million, while its adjusted net income increased 62% year-over-year to $68.86 million. Also, its adjusted EPS came in at $3.34, up 95.3% year-over-year.

Analysts expect DAC’s EPS to increase 92.7% year-over-year to $3.68 for the quarter ending September 30, 2021. In addition, it surpassed Street EPS estimates in three of the trailing four quarters. Also, the company’s revenue is expected to increase 49.4% year-over-year to $178.79 million for the quarter ending December 31, 2021. Over the past year, the stock has gained 1,232.9% to close yesterday’s trading session at $81.71.

DAC’s POWR Ratings reflect solid prospects. The company has an overall grade of B, which translates into a Buy rating in our proprietary ratings system. In addition, it has a B grade for Quality and Momentum.

Click here to see additional grades for DAC (Growth, Value, Stability, and Sentiment). DAC is ranked #8 in the same industry.

Euroseas Ltd. (ESEA)

ESEA provides ocean-going transportation services worldwide. The Greece-based company owns and operates containerships that transport dry and refrigerated containerized cargoes. It has a fleet of 14 vessels, including nine feeder containerships and five intermediate container carriers with a cargo capacity of 42,281 teu.

On September 7, ESEA announced that it has agreed to acquire M/V Piraeus Trader, a 1,740 teu container feeder vessel built-in 2006. Aristides Pittas, the company’s Chairman and CEO, said, “We believe that this acquisition represents a transaction with limited downside risk given the three-year charter contract we have entered with a first-class charterer. This charter will contribute about $22 million of EBITDA during the period of the contract providing us with a significant return on our investment.”

ESEA’s net revenues increased 35.4% year-over-year to $18.29 million for the fiscal second quarter that ended June 30, 2021. The company’s adjusted EBITDA grew 136.9% year-over-year to $10.33 million, while its adjusted net income increased 411.1% year-over-year to $8 million. Also, its adjusted EPS came in at $1.12, up 348% year-over-year.

For the quarter ending September 30, 2021, ESEA’s EPS is expected to come in at $1.39, representing a 13,800% year-over-year increase. In addition, it surpassed the consensus EPS estimates in each of the trailing four quarters. Also, the company’s revenue is expected to increase 206.6% year-over-year to $36.89 million for the quarter ending December 31, 2021. The stock has gained 1,374.1% over the past year to close yesterday’s trading session at $34.20.

It’s no surprise that ESEA has an overall grade of B, which equates to a Buy rating in our POWR Ratings system. The stock has an A grade for Growth and Sentiment, and a B grade for Momentum and Quality.

Click here to see ESEA’s grades for Stability and Value as well. ESEA is ranked #16 in the Shipping industry.

EuroDry Ltd. (EDRY)

Based in Marousi, Greece, ocean-going transportation service provider EDRY owns and operates dry bulk carriers that transport significant bulks, such as iron ore, coal, and grains; and minor bulks, including bauxite, phosphate, and fertilizers. The company operates seven dry bulk carriers comprising four Panamax dry bulk carriers, one Ultramax dry bulk carrier, and two Kamsarmax carriers with a cargo capacity of 528,931 deadweight tons.

On August 23, EDRY announced that it had agreed to acquire M/V Asia Ruby II, a 62,996 dwt dry bulk vessel. This acquisition is expected to help the company further expand its modern fleet cluster.

EDRY’s net revenues increased 250.7% year-over-year to $14.09 million for the fiscal second quarter that ended June 30, 2021. The company’s total assets grew 19% sequentially to $127.96 million, while its adjusted net income came in at $6.62 million compared to a loss of $3.93 million in the year-ago period. Also, its adjusted EPS came in at $2.76 compared to a loss per share of $1.73 in the prior-year period.

EDRY’s EPS is expected to increase 6,400% year-over-year to $3.90 for the quarter ending September 30, 2021. In addition, the company’s revenue is expected to increase 165.5% year-over-year to $59.18 million in fiscal 2021. Over the past year, the stock has gained 797.5% to close yesterday’s trading session at $32.40.

EDRY’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall grade of B, which equates to a Buy rating in our proprietary ratings system.

In addition, it has an A grade for Growth and Sentiment, and a B grade for Momentum and Quality. We have also graded EDRY for Stability and Value. Click here to access all of EDRY’s grades. EDRY is ranked #6 in the same industry.

Note that EDRY is one of the few stocks handpicked by our Chief Growth Strategist, Jaimini Desai, currently in the POWR Growth portfolio. Learn more here.

ZIM shares were trading at $53.35 per share on Tuesday afternoon, down $1.75 (-3.18%). Year-to-date, ZIM has gained 363.91%, versus a 17.21% rise in the benchmark S&P 500 index during the same period.

Nimesh Jaiswal's fervent interest in analyzing and interpreting financial data led him to a career as a financial analyst and journalist. The importance of financial statements in driving a stock’s price is the key approach that he follows while advising investors in his articles.

More...