The global supply chain crisis that reached critical levels during the pandemic lockdowns is facing new stumbling blocks.
Due to the war in Ukraine, businesses that rely on rail transport from Eastern China to Western Europe — by way of Russia — will now have to find new routes. These trains haul everything from laptops and smart phones to new cars and auto supplies.
Shippers are looking to avoid not just the war zone but the broad suite of sanctions hitting Russian goods. Further, some companies are proactively rejecting Russian goods transported via railway in anticipation of future sanctions or added reputational risk.
Trains along this route — part of China’s new Silk Road project — moved about 1.5 million containers with goods valued at roughly $75 billion last year, according to Bloomberg. Railway shipments there typically take about two weeks versus about a month by ship and typically cost about twice as much.
So now, more goods are getting re-routed via sea, which is adding to the already high congestion at some of the world’s biggest ports in China and Hong Kong. As of Wednesday, there were 113 box ships anchoring off Shenzhen and Hong Kong ports, up from 88 two days prior.
Then there’s the recent pandemic outbreak in China.
Chinese officials have introduced strict controls and begun mass testing workers and drivers at ports like Shenzhen, Shanghai and Ningbo, as well as at factories throughout China. The timing is set to impact the busy season for produce shippers from April through July.
And don’t forget the ongoing contract negotiations between the longshoremen unions and on the U.S.’s west coast ports, which are due to expire at the end of June.
The potential for added slowdowns is leading many companies to try to make their shipping arrangements earlier than expected.
Needless to say, the situation is giving profit potential to fundamentally superior stocks in the shipping sector with strong sales and earnings, as well as the ability to raise rates in a highly inflationary environment.
Take Matson, Inc. (NYSE:MATX).
Based in Honolulu, Hawaii, MATX is a leading transportation services company in the Pacific. Its fleet of containerships, as well as roll-on/roll-off ships and barges, haul vital commodities to not only Hawaii, Alaska and Guam, but also to Micronesia, the South Pacific, China and Japan. And its logistics business offers freight forwarding, warehousing, highway brokerage, rail intermodal and supply chain services.
Thanks primarily to a 139% surge in volume to China, Matson achieved blowout results in 2020.
Last month, MATX smashed analysts’ expectations for its fourth quarter and full-year 2021. The shipping company achieved fourth-quarter earnings of $394.5 million, or $9.39 per share, and revenue of $1.27 billion, which represented 361% year-over-year earnings growth and 81% year-over-year revenue growth. The consensus estimate called for earnings of $4.77 per share on $1.08 billion in revenue, so Matson beat earnings estimates by a whopping 97% and revenue forecasts by 17.6%.
For its fiscal year 2021, Matson reported earnings of $927.4 million, or $21.47 per share, and revenue of $3.93 billion. That’s up from earnings of $193.1 million, or $4.44 per share, and revenue of $2.38 billion in fiscal year 2020. These results also topped estimates for earnings of $17.00 per share on $3.74 billion in revenue.
The stock also earns high marks from my Portfolio Grader.
As you can see, MATX earns a Total Grade of “A,” as well as an “A” for its Quantitative and Fundamentals grades. Even better, MATX earns an “A” rating in my Dividend Grader as well, boasting a dividend yield of 0.94%.
Year-to-date, the stock has climbed up about 33%, compared to the S&P 500’s 5% decline. I recommended the stock in Growth Investor over a year ago, back in February 2021, so my Growth Investor subscribers have had the opportunity to reap some of MATX’s rewards.
Another example is ZIM Integrated Shipping Service Ltd. (NYSE:ZIM).
The company is one of the leading containership operators in the world, with a fleet of more than 110 vessels that serve more than 300 ports of call and more than 100 countries. The company’s ships operate out of the five major shipping routes and serve more than 30,000 customers globally.
As an example of the services that it provides, ZIM offers dry cargo containers and refrigerated cargo containers, as well as offers inland transport services, real-time monitoring systems and specialized cargo expertise and services.
Fourth-quarter earnings soared 366% year-over-year to $1.71 billion, up from $366 million in the same quarter a year ago. Fourth-quarter earnings per share were $14.17, which beat estimates for $13.20 per share by 7.3%. Fourth-quarter revenue increased 155% year-over-year to $3.47 billion, also topping estimates for $3.34 billion.
Company management commented, “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.”
As you can see above, the stock also receives a Total Grade of “A” in my Portfolio Grader, as well as an “A” for its Quantitative Grade and a “B” for its Fundamental Grade.
The stock is up nearly 16% so far this year, compared to the S&P 500’s 5% drop over the same timeframe. I recommended the stock to my Growth Investor subscribers about a month ago.
There’s a lot more profit to be had in my Growth Investor service, as I will be adding six new stocks to my Growth Investor High-Growth Buy List and three dividend growth stocks to by Elite Dividend Payer Buy List. I believe these stocks can prosper in these volatile market conditions, and I plan on releasing their names and tickers in my Growth Investor Monthly issue today.
Three of the new stocks are fertilizer companies profiting from the surge in natural gas prices, as well was the disruption in fertilizer shipments from the Ukraine/Russian conflict.
Two new stocks are U.S. energy companies that are profiting from high crude oil and natural gas prices, plus are key to helping make the U.S. energy independent again. Finally, I am adding a building materials supplier that is benefitting from soaring prices of building materials.
In other words, all our new buys are poised to profit from soaring inflation!
If you’d like to give your portfolio a boost in this inflationary environment, join me here at Growth Investor today. For those who are a member of Platinum Growth Club or InvestorPlace Omnia, you will receive full access to these recommendations, as well as every recommendation, Weekly Update, Monthly Issue and bonus features in all of my other services, too.
P.S. Right now, successful Americans like us have a bullseye on our back.
We’re facing a direct threat to our safety and prosperity.
The values we hold dear, like individual freedom, hard work and fiscal responsibility have been tossed aside.
The US national debt is growing at an unprecedented rate. And more spending is coming.
The cost of essential goods and services seems to get more expensive by the day. Critical materials are on backorder for months. Grocery store shelves are half-empty.
If you have any money in savings, in the stock market, in a 401k or even cash stuffed under the mattress, this should make the hair on your neck stand up.
To help understand the monumental problem we’re facing and why both our way of life and financial security are under attack, I put together a special presentation.
So, if you want to protect yourself and grow your wealth, I encourage you to watch this video now.
The Editor hereby discloses that as of the date of this email, the Editor, directly or indirectly, owns the following securities that are the subject of the commentary, analysis, opinions, advice, or recommendations in, or which are otherwise mentioned in, the essay set forth below:
Matson, Inc. (MATX), ZIM Integrated Shipping Service Ltd. (ZIM)