An unsurprising set of quarterly results from Hoegh Autoliners may have exposed over-exuberance in the market.
Shares in the Oslo-listed car carrier owner dipped NOK 10 ($0.91) to NOK 123 on Thursday after it reported a $193m profit for the third quarter, in keeping with its monthly updates that described a market with high rates but low volumes.
DNB analyst Jorgen Lian initially had expected a drop of between 2% and 4% as the fourth quarter guidance was flat.
“We find yesterday’s share-price reaction a reflection of overall deteriorating sentiment across the shipping sector, but believe the muted guidance should prompt downward revisions to a perhaps overly optimistic consensus,” Lian said on Friday.
“Still, potentially lasting cash flow support from long-term contracts yet to be added to the backlog provides good valuation support as strong freight markets are affected by a steep delivery schedule in the quarters ahead.”
Lian reduced his fourth-quarter and 2025 Ebitda forecasts, but raised the target price to NOK 152 from NOK 149 while reiterating a “buy” rating.
Meanwhile, Fearnley Securities analysts Fredrik Dybwad and Nils Thommesen downgraded shares from “buy” to “hold” and dropped its target price to NOK 125.
They said the company still has contracts to renew in 2025 and 2026 and that issues such as slowing car sales and the potential for vessel traffic to return to the Red Sea posed increased risks.
“We remain cautious for seaborne trade volumes for 2025 as car sales need to pick up to support the current growth trajectory, unless Western manufacturers accept to cede further market share,” Dybwad and Thommesen said.
Hoegh Autoliners’ $193m profit was up from the $142m reported for the same period last year and backed by $349m in revenue.
The company earned $101.50 per cbm in the quarter, up 5% from the second quarter and up from the $90.50 per cbm earned in the third quarter of 2023.
Volumes fell to 3.5m cbm, down from 3.9m year on year, as rerouting around the Cape of Good Hope has lowered effective fleet supply.
In early trading on Friday, the company’s shares gained back NOK 1, to NOK 124.
Car carrier owners have enjoyed two years of six-figure time-charter rates owing to higher post-Covid demand and surging Chinese electric vehicle exports.
Many market observers expect the market to stay strong, even as dozens of vessels are set to hit the water in the coming years as bulkers and container ships have been used in lieu of car carrier capacity.
The number of scrapping candidates plus vessels necessary to move Chinese exports and cope with demand is thought to be enough to sop up the newbuilding deliveries, keeping the market balanced.
