Despite the macroeconomic challenges, well-positioned transportation companies have performed well. While the stock market might remain under pressure in the near term, investors could consider buying fundamentally sound transportation stocks, International Seaways, Inc. (INSW) and Euroseas Ltd. (ESEA).
The transportation industry in the United States is valued at $1.36 trillion and 10.68 million Americans were employed in the transportation and warehousing industry in 2022.
The dry bulk shipping market is expected to grow at a CAGR of 3.9% until 2027. The market is expanding with increased global seaborne trade, increased iron ore and coal transportation, and an increasing emphasis on infrastructure development.
Additionally, on-demand transportation provides services in response to a customer's direct request to go from one location to another. The on-demand transportation sector employs a variety of vehicles, including commercial and passenger cars. According to Market.us, the Global On-Demand transportation market will expand at a 19.4% CAGR until 2032.
Let’s discuss the stocks mentioned above in detail.
International Seaways, Inc. (INSW)
INSW owns and operates a fleet of oceangoing vessels for the transportation of crude oil and petroleum products in the international flag trade. It operates in two segments: Crude Tankers and Product Carriers.
INSW’s ROTA of 14.83% is 80.9% higher than the 8.20% industry average. Likewise, its trailing-12-month EBITDA margin of 59.65% is 72.2% higher than the industry average of 34.64%.
Over the last three years, INSW’s dividend payouts have grown at a 100% CAGR. While INSW’s four-year average dividend yield is 3.08%, the company’s annual dividend of $0.48 yields 1.20% at the current price level.
For the fiscal fourth quarter that ended December 31, 2022, INSW’s total shipping revenue increased 257.2% year-over-year to $338.16 million. Its net income attributable came in at $218.43 million, compared to a net loss of $33.99 million in the prior-year quarter. Also, its EPS came in at $4.40, compared to a loss per share of $0.68 in the year-ago period.
The consensus revenue estimate of $940.43 million for the year ending 2023 represents a 10.2% increase year-over-year. Its EPS is expected to grow 16.7% year-over-year to $8.91 in 2023. It has surpassed the EPS estimates in three of four trailing quarters. The stock has gained 97.4% over the past month to close its last trading session at $39.03.
It’s no surprise that INSW has an overall B rating, equating to a Buy in our POWR Ratings system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
It also has an A grade for Momentum and a B grade for Growth, and Quality. It is ranked #15 out of 39 stocks in the A-rated Shipping industry. To access additional ratings for INSW’s Value, Sentiment, and Stability, click here.
Euroseas Ltd. (ESEA)
Based in Marousi, Greece, ESEA provides ocean-going transportation services worldwide.
In terms of trailing-12-month ESEA’s ROTA of 32.33% is 526.7% higher than the 5.16% industry average. Likewise, its trailing-12-month EBIT margin of 57.49% is 498.6% higher than the industry average of 9.60%.
While ESEA’s four-year average dividend yield is 1.32%, the company’s annual dividend of $2 yields 10.88% at the current price level.
For the fourth quarter that ended December 31, 2022, ESEA’s revenue increased 12.1% year-over-year to $42.89 million. As of December 31, 2022, the company’s total current assets were $48.87 million, compared to $32.89 million as of December 31, 2021. Also, ESEA’s total assets were $328.59 million, compared to $221.42 million for the same period.
Street expects ESEA’s revenue to increase 14.2% year-over-year to $207.70 million in 2024. Its EPS is expected to come in at $10.07 in 2024. ESEA’s share have lost marginally intraday to close the last trading session at $18.39.
ESEA’s POWR Ratings reflect its solid prospects. The stock has an overall B rating, translating to Buy in our proprietary rating system.
It also has a B grade for Value, Sentiment, Momentum and Quality. It is ranked #10 within the same industry. Click here to see the additional ratings for ESEA (Growth and Stability).
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INSW shares were unchanged in premarket trading Wednesday. Year-to-date, INSW has gained 10.07%, versus a 8.11% rise in the benchmark S&P 500 index during the same period.
About the Author: Rashmi Kumari
Rashmi is passionate about capital markets, wealth management, and financial regulatory issues, which led her to pursue a career as an investment analyst. With a master's degree in commerce, she aspires to make complex financial matters understandable for individual investors and help them make appropriate investment decisions.
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