If investors were angry at Scorpio Tankers after the company reported fourth-quarter earnings on Wednesday, it sure didn’t last long.
The New York-listed shipowner’s stock was humming during Thursday morning trading on the New York Stock Exchange one day after shareholders pushed it down 1.75%, despite an earnings report that beat analyst estimates and guidance for even stronger rates in the current quarter.
Veteran Evercore ISI analyst Jonathan Chappell attributed the one-day dip to Scorpio’s silent act on further plans to pump up capital returns to investors, which could include an outsize special dividend in the view of some.
“Lack of full transparency on the path forward doesn’t change the immense cash pile that is building or the optionality on how to use that cash,” Chappell told clients in a research note.
“Nor does a nearly 30% discount to pro forma year-end [net asset value] seem to be an appropriate penalty for keeping its cards close to its vest.”
Chappell wrote before today’s trading, which seems to reflect that investors have got over their snit.
Shares of the product tanker giant were up more than 3% to $68.50 in the first hours of trading, more than making up for Wednesday’s losses.
Scorpio did raise its quarterly dividend to $0.40 per share on Wednesday from $0.35, the fourth hike in the past five quarters. But for some, that was not enough.
As TradeWinds reported last November, president Robert Bugbee said on the previous quarterly earnings call that the company is close to the point at which it will shift priorities from debt reduction to a higher return of capital to shareholders.
This apparently led some to expect that there could be an upside surprise waiting as soon as this week, and there was not. Moreover, Bugbee was not willing to provide further detail on the timetable or exactly how the cash might be returned.
“We’re never going to telegraph it,” he said in response to a question from Ben Moore, a Deutsche Bank analyst.
“I’m going to say it to everybody. There is no way that we’re going to come out and say, ‘Oh, we’re going to buy back this much stock’. Or ‘we intend to pay out this much extraordinary dividend’, or ‘we intend to raise the regular dividend to X’.
“We’re just going to act on whatever we have done … so we’re not going to wake up one day and say, ‘Hey, guys, we’re happy, now this is what we’re going to do’.”
