Jefferies has cut its estimates for Golden Ocean Group shares after the bulker owner registered a lower third-quarter profit that missed analyst consensus.
The US investment bank cut estimate of fourth-quarter earnings by roughly 29% to $0.15 per share, as it also knocked 4.1% from its 2023 earnings-per-share forecast.
“Freight rates remain soft and will likely lead to lower earnings in [the fourth quarter] while normal seasonal factors are likely to weigh on [first quarter] results,” analyst Omar Nokta wrote in a note on Wednesday.
“However, positive developments in the Chinese property market and an overall strong coal trade point to a notable recovery in dry bulk activity later in 2023.”
Jefferies also reiterated its ‘hold’ rating for Golden Ocean, after the New York-listed shipowner $105m in net income for the quarter, down from $164m a year earlier.
The bank based its rating on Golden Ocean Group on lower-than-expected average freight rates of $23,100 per day for the three-month period, compared to the bank’s forecast of $24,000 per day on average.
It also reiterated a price target of $10 for 2022. Golden Ocean Group shares have fallen 12.3% to $8.48 per share as of Wednesday’s mid-day trading on Wall Street.
Jefferies also noted that Golden Ocean Group’s revenue of $282m, which fell from $388m a year ago, missed analyst expectations. Earnings per share (EPS) of $0.36 fell short of Jefferies’ forecast by $0.03 and issed consensus by $0.12.
Golden Ocean Group’s third-quarter adjusted Ebitda of $118m also fell short of Jefferies’ expectation of $126m and the average analyst estimate of $131m.
“The lower realised freight rates are a result of softer rates as the quarter progressed while accounting treatment for load-to-discharge seems to have played a role as well,” Nokta wrote.
Jefferies also pointed out that the owner booking 75% of fourth-quarter capesize revenue at $23,100 per day and 78% of panamax revenue at $19,100 per day may come in lower at the end of the quarter once ballast days are recorded.
Jefferies expects fourth-quarter averages of $20,500 per day for the capesizes and $17,600 per day for the panamax fleet, leading to its fourth-quarter EPS and Ebitda projection of $82m for the last three months of 2022.
“The start of 2023 is likely to be softer as well due to seasonal norms, but we are optimistic on a stronger market later in 2023 as recovering Chinese steel demand improves overall iron ore volumes,” Nokta wrote.
“We remain on the sidelines with Golden Ocean due to the current dry bulk market softness. We see estimate revisions for the [fourth quarter] and a potentially soft start to 2023 as reasons for pause.”
Eric Priante Martin contributed to this story.
