Wells Fargo Securities said US-listed tanker shares may find the bottom of their recent declines in the second quarter even as the the US bank choppped its earnings expectations for the sector.
Analyst Michael Webber told clients today that net asset values should also touch their nadir in the near future as much of the orderbook unwinds amid Opec's continued production restraint. Webber said John Fredriksen's Frontline may have already found the bottom for VLCCs with its February resale acquisition at just $77.5m.
"With asset values at/near cyclical lows and NAV metrics following suit, we see value in the group," he said.
Still, the optimistic did not lead Wells Fargo to roll out a series of upgrades, as Webber said he is still waiting to see how deep the seasonal summer trough will be. He expects a "rough" summer and cut 2017 VLCC rate forecast to $26,500 per day, a 30% decline from his last estimates.
The lower rate estimates led him to shift his earnings estimates lower for all crude and products tanker owners he covers: Euronav, DHT Holdings, Tsakos Energy Navigation, Navios Maritime Acquisition, Teekay Tankers, Frontline, Ardmore Shipping and Nordic American Tankers.
Wells Fargo's 2017 EPS estimates
| Stock | Current | Prior |
| Ardmore Shipping | $0.01 | $0.09 |
| DHT Holdings | $0.16 | $0.35 |
| Euronav | -$0.03 | $0.22 |
| Frontline | $0.09 | $0.15 |
| Nordic American Tankers | $0.15 | $0.25 |
| Navios Maritime Acquisition | $0.13 | $0.14 |
| Teekay Tankers | $0.09 | $0.24 |
| Tsakos Energy Navigation | $0.48 | $0.49 |
Euronav took the biggest hit. Wells Fargo now expects the Paddy Rodgers-led company to deliver a loss of $0.03 per share, compared to prior expectations calling for earnings per share of $0.22.
Though Webber's estimates are slightly below consensus expectations, he is not alone in anticipating a gloomier rate environment in 2017 than had been previously forecast.
Maxim Group analyst James Jang, for example, lowered his EPS estimates yesterday for DHT Holdings, Nordic American Tankers and Tsakos Energy Navigation as he ratcheted down his rate forecasts.
"We continue to believe the tanker cycle could be entering an upturn, however, we believe the continued headwinds in 2017 could push out the start of the recovery till 2018," he said.
