Another bank is treating International Seaways’ recent earnings miss as a temporary setback on the road to big earnings.
Analysts at Fearnleys argued that a firming tanker market as the northern hemisphere winter sets in has the potential for big returns while reiterating its $71 per share target price.
“Furthermore, with ample financial flexibility … and low breakevens, the company is ready to take advantage of any opportunity that arises and should be able to serve both their fleet renewal initiatives while maintaining shareholder distributions,” analyst Fredrik Dybwad said.
Dybwad expects the amount of oil moving on the water to increase this winter, with tanker tonne-mile demand already up 1.7% year to date and supply set to grow by 500,000 barrels per day primarily out of the Atlantic basin, according to the International Energy Agency.
“Hence, being mostly long-haul trades, we argue there is only a matter of time before earnings tick up,” he said.
“Adding to this, the 1.5m barrel per day supply growth forecasted for next year will also mainly come out of the Atlantic, further adding to tonne-miles.”
Seaways’ New York Stock Exchange-listed shares crashed from $50.49 to a low of $48.47 earlier this month following its second-quarter financial report, where its bottom line missed analyst expectations by $0.16 per share.
But shares recovered, hitting $51.31 last Friday, as the VLCC market ticked up and investors followed analyst advice to buy the dip.
Following earnings, Stifel’s Ben Nolan said the company’s third-quarter guidance — $37,300 per day with 47% of days booked — is roughly in line with his expectations.
Two days later, Clarksons’ Frode Morkedal reiterated a “buy” rating with a $70 target price, trumpeting the overall positive tanker market outlook.
Many market observers expect tanker earnings to strengthen following the cyclical summer slog that sees rates dip.
Among the biggest beneficiaries are expected to be VLCCs, which have trailed their smaller counterparts in recent years as their rates are buoyed by geopolitical issues in the Red and Black seas.
Seaways has 13 VLCCs in its fleet, alongside a mix of suezmaxes, aframaxes, LR1s and MRs.
However, over the past several days VLCC spot rates have shown improvement, with the Baltic Exchange’s time-charter equivalent assessment climbing more than $9,500 per day to $37,010 per day on 16 August and another $1,660 to $38,670 per day on Monday.
