Boxship owners may take a few years to fully recover from the coronavirus, according to analysts.
Stifel lowered earnings forecasts on New York-listed Costamare and Capital Product Partners through 2022 amid virus rate overhang and sector interest in moving goods on land.
"We took down our rate and utilisation assumptions, so our earnings and cash flow estimates came down," analyst Ben Nolan told TradeWinds.
"We do expect a recovery in trade from current levels, but we do not expect things to get back to pre-Covid levels anytime soon.
"Consequently, there could be a more protracted period of lower demand relative to supply."
The US investment firm lowered its price target for Costamare's shares to $6.50 from $9 and brought down its earnings per share (EPS) forecast for 2020 to $0.89 from $1.05.
EPS outlook
It also lowered EPS outlooks for 2021 to $0.93 from $1.06 and 2022 to $1.01 from $1.06.
Stifel lowered Capital Product Partners' price target to $12.50 from $15 and EPS forecasts for 2020 by $0.13 to $1.66 and 2021 by $0.22 to $1.51. It kept the 2022 EPS forecast at $1.73.
The forecast cuts come as the shipowners' liner customers are reeling.
"Liner companies should continue to be stressed as they were not making much money before the pandemic on top of still high debt loads, and likely getting hit from multiple fronts with the recent expansion into logistics and ports," Nolan wrote in a note.
For example, Danish giant AP Moller-Maersk in February agreed to buy US-based warehousing and distribution company Performance Team and 800,000 square metres of US storage facilities.
The acquisition brought Maersk Warehousing & Distribution North America's 563,000 square metres of warehousing nationwide to 1.36m square metres.
Meanwhile, Asian plant closures and lower US and European import demand have constrained liner sector balance sheets and stopped rechartering activity for some time to come, Jefferies analyst Randy Giveans said.
South Korean support
"However, in a sign of support, South Korea announced plans to provide $1bn to shipping lines in order to repay maturing debts," he told TradeWinds.
"As liner companies stabilise, and demand rebounds, we expect chartering activity and rates to improve, which will be very welcomed by the containership owners."
The Covid-19 overhang will indeed stay with boxship owners for years, but some, such as Global Ship Lease (GSL), may fare better than others thanks to healthy contract coverage, B Riley FBR analyst Liam Burke said.
"Facing declining global GDP in 2020, the container shipping industry could see trade declines similar to 2009," he wrote in a note.
GSL is somewhat insulated from the expected downturn with $767m-worth of booked charters over the next 2.5 years, but B Riley still lowered its price target to $12 from $15 amid rechartering uncertainty.
"We like GSL's medium-term contracts and potential for earnings upside with exposure to an improving spot market in 2021," he wrote.
