It hasn’t been smooth sailing by any stretch of the word for companies in the shipping industry lately. An uncertain outlook for global growth and mixed trading in the oil market has led to some wild moves for the space in recent months. It also hasn’t helped that the Baltic Dry Index hit fresh five year lows in February, suggesting that more pain was ahead for the space. However, recent trading for the dry bulk index has been more favorable and we are now at 2016 highs for this important benchmark. Oil has also moved back off of its lows which has given more hope to companies in the space.
A great example of these trends is with Nordic American Tankers Limited (NAT), as the company has faced the same ebbs and flows as the industry at large. And this company, which operates over two dozen oil tankers, has stormed back to breakeven for 2016, a huge feat considering it was down 20% on the year in early February. However, this may actually just be a great time to exit this company, as a return to more sluggish trading could be ahead, at least if we look to recent estimates, and a few specific metrics for NAT stock.
A Look at NAT’s Metrics Signal Trouble
While NAT has seen a few estimate cuts, NAT hasn’t seen any analysts raise their estimates for NAT earnings over the past sixty days. This includes looks at the current quarter, the current year, and the next year time frame too. Growth rates are now projected to be negative for the full year, and even worse for the next year.
It also doesn’t help that NAT doesn’t have the best history in earnings season, as it has had trouble living up to expectations in the past. It is actually posting an average miss over the past four quarters, including last quarter’s 26% miss. No wonder NAT has a Zacks Rank #5 (Strong Sell) and that we are looking for a return to underperformance this quarter, and are worried by the prospect of the earnings report which is coming in roughly a month’s time. Beyond earnings though, NAT ranks pretty poorly for two other key metrics, Value and Momentum. In both of these areas NAT receives a grade of ‘D’,suggesting there are far better choices out there in the market.
This is especially true when you take a deeper dive into NAT’s statistics. The company has a Price-to-Sales ratio more than twice the industry average, while its PE (though relatively low) is roughly double the industry too. And from a momentum look, NAT has seen its full year estimate plunge close to 7.7% in the past month, while its recent price momentum hasn’t been too great either.
These Shipping Stock Choices Make Better Sense
Clearly, NAT may face some trouble on the horizon. However, the broader industry isn’t looking too much better as the industry rank is currently just outside the bottom 25% for the shipping industry. But despite the overall gloom, there are actually a few companies that may be well-positioned in the industry.
There are two companies with ‘strong buy’ ranks at time of writing that may be worth a closer look instead of NAT at this time. Both GasLog Partners LP (GLOP) and Ship Finance International Limited (SFL) currently fall into this group, and since both have moved up to ‘strong buy’ ratings in just the past week, now could be the time to give these a closer inspection over Nordic American in the near term.
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