Bank of America has dropped its buy rating on Teekay Tankers, arguing its best days are behind it for now.
Analyst Ken Hoexter said in a note on Friday that the New York-listed, Vancouver-based tanker owner would take a hit with rates expected to decline in the third and fourth quarters — even with much of its fleet on time charters.
He lowered the company from "buy" to "underperform".
"While we credit the company with delivering on its deleveraging strategy, having reduced net debt by $445m since 2Q19, it cannot escape the acute rate pressure it faces as vessels from floating storage return back into the spot market," Hoexter wrote.
He now expects Teekay Tanker's full-year 2020 earnings per share figure to come in at $56.40, down from $7.20 and $1.40 down from $3 in 2021.
Teekay Tankers shares had fallen by 1.68% to $14.65 in late trading on Friday.
On Thursday, the company's shares fell 4.3% to $14.89 after reporting a $98.2m profit for the second quarter, up from $14.3m year-over-year.
Chief executive Kevin Mackay and chief financial officer Stewart Andrade said on the earnings call that the company's focus would remain on reducing its debt, continuing with a plan it announced in November 2019.
The company would not, they said, expand or renew their fleet nor buy shares back, even as they trade below net asset value.
Andrade said any changes would come out of discussions with Teekay Tankers' board of directors.
Hoexter agreed with Mackay's assessment that the fundamentals look good moving forward, as the orderbook remains low with a global fleet only getting older.
But as floating storage, the catalyst for the blockbuster rates seen in the second quarter, unwinds he said "rate pressures will likely overhang shares".
