While Frontline may have fallen short of analyst Jonathan Chappell’s expectations, the Evercore analyst is more focused on the company’s future.
In a note published on Friday, Chappell said the John Fredriksen-backed tanker giant’s earnings per share of $0.23 fell below his forecast of $0.31 forecast, but that was “effectively irrelevant” given the company’s strong forward bookings.
“[Third quarter bookings] for this period greatly exceeding our forecasts and leading to a near-doubling of our prior EPS projection for the quarter (to $0.37 from $0.19),” Chappell said, while raising his price target for the company to $14 from $13.
For the current quarter, which ends on 30 September, VLCCs have been booked at an average of $28,100 per day while suezmaxes have been booked at $45,000 per day, with 73% of days booked for both.
Its LR2 product tanker fleet, which Frontline said had their best-ever quarterly performance in the second quarter at an average of $38,600 per day, were booked even higher at $46,200 per day with 62% of days booked.
Chappell also said he was excited by the return of the company's dividend for the first time in two years, which he estimated would double to $0.30 in the third quarter and would be sustainable moving forward given the low orderbook and reshuffling of the global oil market.
“Frontline continues to modernise its fleet and add to its scrubber count (now 65% of the fleet), while retaining material operating leverage to end-markets that have either already lifted meaningfully off the bottom (LR2s and suezmaxes) or are just beginning to show early signs of a recovery (VLCCs),” he said.
