Will these shipping stocks weather the supply storm?

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Jhe global community has grappled with supply chain challenges since the onset of the pandemic, rocking businesses across sectors, industries and countries.

The pandemic may have abated, but the supply issues certainly haven’t and are getting worse every day.

Shanghai’s recent export troubles exacerbate already disrupted international logistics services and supply chains.

To curb the coronavirus epidemic, Shanghai continued its confinement for the fourth week. Shanghai is one of the largest manufacturing and export centers in China. Its exports have been hit hard as logistics services have been hit hard by the lockdown.

Although Chinese ports are still operating, the lockdown situation in China has led to a shortage of trucks. Cargo is unable to reach the port, causing containers and ocean carriers to sit idle. As a result, there is a massive drop in freight volumes and exports.

Likewise, there is a huge gap between supply and demand in the shipping industry around the world, which is causing prices to rise sharply.

Once the lockdown is released, factories will make up for lost production, further increasing demand and pushing prices even higher.

In conclusion, this means that international logistics may not return to normal anytime soon, creating interest in high-demand shipping inventory.

Let’s take a look at the top shipping stocks with the fastest growth potential.

Navios Maritime Partners LP (NYSE: NMM)

Based in Greece and listed on the NYSE, Navios Maritime Partners LP is an international owner and operator of dry cargo vessels and tankers. Navios Partners owns and operates its fleet of dry bulk carriers and container ships with a diverse customer base worldwide.

Navios Partners operates through three segments: containerships, dry bulk and tankers, on 15 types of vessels serving more than 10 end markets. Shares of the company, with a current market capitalization of $1 billion, have gained more than 20% in the past six months.

On February 17, the company announced its results for the fourth quarter ended December 31, 2021. Revenue nearly quadrupled year-over-year to $268.1 million, while adjusted net income nearly increased tenfold to $121.8 million.

However, the quarterly results fell short of analysts’ expectations on the revenue ($276.14 million) and earnings per share (EPS) ($4.03 per share vs. consensus of $4.35) fronts. per share).

Annual results also recorded record growth. Revenue for fiscal 2021 rose 214.5% to $713.2 million, while adjusted net income nearly quadrupled to $364.15 million.

The outstanding performance was primarily driven by substantial increases in fleet size as well as an increase in the Time Charter Equivalent (“TCE”) rate.

Preparing for the continued increase in demand, Navios Partners has made a $1.0 billion investment in 18 new ships delivered through 2024 with the acquisition of four new 5,300 container ships EVP in the fourth quarter.

CEO of Navios Partners, Angeliki Frangou, commented: “In 2021, we have redesigned the public shipping company…Each segment works independently to mitigate the volatility of the other. Although we do not expect this to work perfectly, we believe that diversity will sufficiently reduce volatility and create flexibility in our operational and financial decision-making process when chartering, buying and selling vessels and financing our activities.

TipRanks’ Stock Investors tool shows that investors currently hold a very positive stance on Navios Maritime Partners, with 4.6% of investors increasing their exposure to NMM stocks over the past 30 days.

Denmark-based AP Moller-Maersk A/S, popularly known as Maersk, is a shipping company active in ocean and inland freight forwarding and related services, such as supply chain management and port operations.

It operates transportation and logistics activities under four main divisions: Maersk Line (container shipping), APM Terminals (ports), Damco (freight forwarder) and Svitzer (tugs and port support vessels).

In fact, Maersk Line is the largest container shipping company in the world, with a market share of around 20%. Shares of the shipping giant have gained 17.75% over the past year, outperforming benchmarks.

Now let’s see what Wall Street analysts are saying about the stock.

Yesterday, Berenberg analyst William Fitzalan Howard reduced the price target on AP Moller Maersk to DKK 20,500.00 (from DKK 22,000.00) and reiterated a Hold rating.

On March 22, Deutsche Bank analyst Andy Chu downgraded AP Moller Maersk to Hold de Buy and also reduced the price target to DKK 22,500 (from DKK 26,400).

Notably, Chu shifted from a long stance on the entire container shipping and logistics space to a hold view based on his concerns over a weaker GDP outlook, reduced power to consumer purchase and an increase in wage and fuel prices.

Specifically, Chu lowered the recommendation on AP Moller Maersk based on limited upside. It arrived at its price target based on a sum-of-the-parts valuation based on the EV/IC and EV/EBITDA multiples for each division.

For the Ocean division, the analyst used 1.0x EV/IC (the historical average multiple for the container shipping industry). For the Logistics and Services division, he assigned an EV/EBITDA multiple of 12x (in line with peer group valuations for logistics companies).

However, investors completely disagree with Chu. TipRanks’ Stock Investors tool shows that investors currently hold a very positive stance on AP Moller Maersk, with 8.1% of investors increasing their exposure to AMBKY shares over the past 30 days.

Conclusion

Maritime stocks have thrived during the pandemic and are expected to continue to do so despite a growing number of risks from the Russian-Ukrainian conflict, inflationary pressures and macroeconomic uncertainty.

With a diverse fleet and strong partnerships, NMM remains well positioned to seize growth potential once the aforementioned uncertainties dissipate and is our preferred choice in shipping.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


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