Investors of ZIM Integrated Shipping Services (NYSE:ZIM) had little to shout about today, as shares fell 9% due to a disappointing Q2 report.
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Most notably, revenue fell by a 62% year-over-year to $1.31 billion while also coming in $40 million below the consensus estimate. The average freight rate per TEU (twenty-foot equivalent unit) hit $1,193, falling from the $3,596 generated in 2Q22. Adj. EBITDA fell by 87% from the same period a year ago to $275 million, missing Street expectations by 11%.
During the quarter, the company incurred a net loss of $213 million, in stark contrast to the net income of $1.33 billion reported in 2Q22. This resulted in an EPS of -$1.79, significantly deviating from the analysts’ projected figures by $0.89. Due to this substantial net loss, the company has chosen not to distribute dividends to its shareholders.
On a slightly brighter note, the company’s guidance remains unchanged. For the full fiscal year, ZIM expects to deliver adj. EBITDA between $1.2 billion to $1.6 billion.
There’s no hiding from a disappointing quarter, says J.P. Morgan Sam Bland. “The Q2 results are weaker than we expected, albeit we hadn’t (and maybe consensus hadn’t) updated following the July profit warning,” he said. “Guidance is unchanged, and the worse end implies a continuation of the Q2 loss run-rate. We can understand why this pace of losses may reduce in Q3, given recent rate / volume improvements, although our expectation is that both JPMe and BBG consensus will move lower.”
All told, Bland rates ZIM shares a Neutral along with a $17.70 price target. However, the analyst might as well have said Buy, considering his projected target implies a 42% potential upside for the shares. (To watch Bland’s track record, click here)
Barclays analyst Alexia Dogani has a less forgiving take, noting that while the company already warned of what was coming in July, the report still amounted to a letdown.
“While earnings expectations have been rebased with the revised guidance, ZIM remains highly operationally geared to the spot market, where we continue to see oversupply risks,” Dogani explained. “While ZIM pre-released its revised guidance on July 12th, the widening losses and the 2Q23 EBITDA miss will still disappoint the market and thus expect shares to be weak.”
Going by the shares’ subsequent performance, that turned out to be a correct forecast. Meanwhile, Dogani maintained an Underweight (i.e., Sell) rating although her $13 price target makes room for modest gains of 4% from current levels. (To watch Dogani’s track record, click here)
Elsewhere on the Street, the stock garners 2 additional Holds and 1 Sell, all coalescing to a Moderate Sell consensus rating. Nevertheless, the $14.14 average target implies that the analysts think shares are now undervalued by 16%. (See ZIM stock forecast)
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Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
