Morgan Stanley is expecting public tanker owners to fall short of consensus forecasts in the first quarter, but it shouldn't scare off investors ahead of the seasonal downturn.
Analyst Fotis Giannakoulis expects Ebitda for the peer group to come in roughly 6% lower than expectations, even though spot rates were up year-over-year.
"Following a stronger than expected 1Q, the anticipated seasonal weakness in crude tanker rates has kicked in and is expected to last during 2-3Q," Giannakoulis wrote.
"As the oil market tightens, we expect investors to see beyond the near-term lull in crude tanker demand.
"Next year's outlook is strong driven by IMO 2020, coupled with continuing growth in US exports and return of Opec supply."
In the note he revised Scorpio Tankers price target price to $27 and Ardmore Shipping Company's to $7.50 from $7.
In midday trading, both companies were up, with Scorpio jumping 3.8% to $20.76 and Ardmore rising 2.24% to $6.16.
Giannokoulis, who covers eight tanker companies, reiterated overweight ratings on Euronav, DHT Holdings and Scorpio Tankers.
The note said the eight companies were trading at an approximate 15% discount to net asset value.
