The world is awash in oil right now—and American consumers aren’t the only ones benefiting from the sudden plunge in prices.
Jumping on the record low cost per barrel, countries around the globe have been importing and stockpiling crude oil at record rates. You have to put this stuff somewhere, and you have to find a way to move it around efficiently.
It’s a pattern that’s sharply increased the demand for crude tankers, and the company I want to tell you about today has been riding that wave into some major gains.
Teekay Tankers (TNK) is the world’s largest operator of mid-sized tankers. After their recent acquisition of a dozen Suezmax tankers from Principal Maritime, TNK operates a fleet of nearly 100 vessels that crisscross international waters, carrying crude oil, gas and other products.
What I really like about TNK are its solid customer relationships, some of which have spanned over 40 years.
The company has access to diverse cargo streams and does business with some of the largest names in the industry—BP (BP), Exxon Mobil (XOM), Chevron (CVX) and Valero Energy (VLO), just to name a few.
This stock has been coming on nicely in recent months—sort of a stealth move after its deep trough in late 2014, which you can see in the chart below.
Now, though, revenues are soaring and margins are expanding, with a cash flow that tops most of the company’s rivals. Last quarter, TNK beat analysts’ estimates with revenue of $108 million (compared to just $44 million last year in Q2) and EPS of 38 cents per share.
Gross margins widened from 8.32% to 43.06% compared to the same quarter last year, and earnings consensus for fiscal 2016 moves a little bit higher every other week. The forecast looks to only get brighter from here.
Falling crude tanker rates may pull back on revenue in the third quarter, but keep in mind rates are still higher than last year’s levels. Plus, the new Suezmax additions should be fully integrated into the fleet by the end of October, cementing the company’s long-term positive revenue trend.
The crude oil market isn’t always easy to predict so there is higher than average risk here, but a well-timed breakout could shoot shares up to $10, which would be big money from current prices just below $8.
