The Long-Term Outlook of ZIM Integrated Shipping Is Positive

ZIM stock - The Long-Term Outlook of ZIM Integrated Shipping Is Positive

Source: Hieronymus Ukkel /

It’s a good time to be a shipping company. Despite a recent decline in shipping rates, they remain “far higher than… before the pandemic,” The Wall Street Journal recently reported. Of course, the high rates have boosted the financial results of ZIM Integrated Shipping (NYSE:ZIM), and they’ve been positive for ZIM stock.

Indeed, over the last year, ZIM’s shares have soared 88%. Nonetheless, the shares have pulled back recently. Their valuation remains quite low while the macroeconomic outlook remains generally favorable for shipping companies. As a result, although ZIM stock is going to face a number of challenges in the near- to medium-term, I recommend investors buy the shares.

In 2021, the net income of the company soared an incredible 366% to a hefty $1.71 billion, ZIM reported on March 9. And in the fourth quarter of 2021, its EBITDA, excluding certain items, increased 345% YOY to $2.36 billion. In Q4, its revenue jumped 155% YOY to $3.47 billion.

“Today, ZIM is commercially and operationally stronger than ever making us more optimistic about our future than ever before. We are excited to carry the exceptional momentum of 2021 forward into 2022, and well beyond,” said CEO Eli Glickman about the company’s Q4 earnings press release.

On the valuation front, ZIM stock is trading at a tiny trailing price-to-earnings ratio of just 1.4x.

There’s some evidence that, as Covid-19 fears ease, U.S. consumers are spending less on goods and more on services. Similar trends may be occurring in the EU, Canada and Australia. Of course, that situation is negative for ZIM. And The Wall Street Journal recently reported the Drewry World Container Index had dropped to about $8,000 per container from its 2022 high of $9,700.

Finally, sky-high fuel prices in Europe could negatively impact the demand for goods by consumers there.

On the positive side, however, U.S. consumers have a great deal of cash while worries about Federal Reserve rate hikes are overdone. And in China, Beijing is starting to ease its coronavirus closures in Shanghai and its government is looking to stimulate the economy.

Both developments should boost demand for products from China. Meanwhile, the reopening of Shanghai should help ZIM by easing congestion at the city’s massive port.

ZIM stock has some positive catalysts and is likely to be hurt by a few negative trends. But the company reported in March that its outlook remained strong, and the shares’ valuation is very attractive. Therefore, I expect ZIM stock to perform very well over the medium-term and the long-term.

On the date of publication, Larry Ramer did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the Publishing Guidelines.

Larry Ramer has conducted research and written articles on U.S. stocks for 15 years. He has been employed by The Fly and Israel’s largest business newspaper, Globes. Larry began writing columns for InvestorPlace in 2015. Among his highly successful, contrarian picks have been GE, solar stocks, and Snap. You can reach him on StockTwits at @larryramer.

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