Frontline (FRO) AI Stock Analysis

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Frontline

(NYSE:FRO)

75Outperform

Frontline's strong financial performance, marked by robust revenue growth and profitability, is a key strength, though concerns about declining net profit margins and cash flow persist. The stock is attractively valued with a low P/E ratio and high dividend yield. Technical indicators suggest a neutral to slightly bearish trend, which could be a risk. Earnings call insights reflect solid liquidity and cash generation potential, but geopolitical challenges and reduced adjusted profits are notable risks. Overall, Frontline presents a balanced investment opportunity with strong valuation appeal but requires monitoring of financial and geopolitical risks.

Frontline (FRO) vs. S&P 500 (SPY)

Market Cap

$3.97B

Dividend Yield9.78%

Average Volume (3M)3.09M

Price to Earnings (P/E)8.0

Beta (1Y)0.51

Revenue Growth13.77%

EPS Growth-24.50%

CountryUS

Employees85

SectorEnergy

Sector Strength55

IndustryOil & Gas Midstream

Share Statistics

EPS (TTM)0.30

Shares Outstanding222,622,900

10 Day Avg. Volume2,959,694

30 Day Avg. Volume3,090,810

Financial Highlights & Ratios

PEG Ratio-0.83

Price to Book (P/B)1.65

Price to Sales (P/S)0.00

P/FCF Ratio-21.60

Enterprise Value/Market Cap1.81

Enterprise Value/Revenue0.91

Enterprise Value/Gross Profit9.12

Enterprise Value/Ebitda1.66

Forecast

1Y Price Target

$14.99

Price Target Upside-17.04% Downside

Rating ConsensusModerate Sell

Number of Analyst Covering3

Frontline Business Overview & Revenue Model

Company DescriptionFrontline Ltd., a shipping company, engages in the seaborne transportation of crude oil and oil products worldwide. It owns and operates oil and product tankers. As of December 31, 2021, the company operated a fleet of 70 vessels. It is also involved in the charter, purchase, and sale of vessels. The company was founded in 1985 and is based in Hamilton, Bermuda.

How the Company Makes MoneyFrontline Ltd. generates revenue primarily through the chartering of its tanker fleet to oil companies and traders. The company utilizes a mix of spot market charters, where vessels are hired for single voyages, and time charters, which involve leasing ships for a set period, typically for months or years. This dual approach allows Frontline to capitalize on fluctuations in charter rates and optimize fleet utilization. Additionally, Frontline may engage in strategic partnerships or joint ventures to enhance its market position and operational efficiency. Factors such as global oil demand, geopolitical events, and changes in regulatory environments significantly influence Frontline's earnings, as they impact charter rates and the shipping industry's overall dynamics.

Frontline Financial Statement Overview

Summary

Frontline demonstrates strong revenue growth and maintains healthy profit margins, reflecting robust profitability. However, a decline in net profit margin and negative free cash flow raise concerns about sustainability. The balance sheet indicates moderate leverage, but rising debt levels require careful monitoring to prevent financial strain.

Income Statement

Very Positive

Frontline has demonstrated strong growth in revenue over the years, with a revenue growth rate of 13.78% from 2023 to 2024. The company maintains healthy margins, including a gross profit margin of 50.96%, an EBIT margin of 38.12%, and an EBITDA margin of 49.20% for 2024. However, the net profit margin decreased from 36.43% in 2023 to 24.17% in 2024, indicating increased costs or other financial challenges.

Balance Sheet

Positive

Frontline shows a solid equity position with an equity ratio of 37.63% as of 2024. The debt-to-equity ratio is 1.60, signifying moderate leverage. While the return on equity (ROE) is 21.17%, indicating effective use of equity, the increasing debt levels could pose future risks if not managed carefully.

Cash Flow

Positive

The cash flow statement reflects a challenging cash flow situation with a negative free cash flow of -178.84 million USD in 2024. There is a decline in operating cash flow from 2023 to 2024. The operating cash flow to net income ratio is 1.49, showing reasonable cash generation relative to net income, but the ongoing negative free cash flow poses a concern.

Dec 2024	Dec 2023	Dec 2022	Dec 2021	Dec 2020
Breakdown
Income Statement		Total Revenue
2.05B	1.80B	1.43B	749.38M	1.22B
	Gross Profit
1.04B	776.11M	481.00M	30.61M	536.70M
	EBIT
781.71M	746.67M	442.80M	29.85M	507.80M
	EBITDA
1.15B	1.06B	725.83M	217.24M	628.35M
	Net Income Common Stockholders
495.58M	656.41M	475.54M	-11.15M	412.88M
Balance Sheet		Cash, Cash Equivalents and Short-Term Investments
417.56M	315.75M	490.81M	115.51M	177.36M
	Total Assets
6.22B	5.88B	4.78B	4.12B	3.92B
	Total Debt
3.75B	3.46B	2.37B	2.37B	2.20B
	Net Debt
3.33B	3.15B	2.12B	2.26B	2.03B
	Total Liabilities
3.88B	3.61B	2.51B	2.46B	2.31B
	Stockholders Equity
2.34B	2.28B	2.27B	1.65B	1.61B
Cash Flow		Free Cash Flow
-178.84M	-775.24M	52.93M	-399.47M	-120.26M
	Operating Cash Flow
736.41M	856.18M	370.89M	62.93M	604.06M
	Investing Cash Flow
-483.40M	-1.24B	-239.47M	-363.06M	-715.97M
	Financing Cash Flow
-147.80M	433.07M	10.03M	223.55M	124.18M

Frontline Technical Analysis

Technical Analysis Sentiment

Positive

Last Price18.07

Price Trends

50DMA

15.84

Positive

100DMA

16.00

Positive

200DMA

18.10

Negative

Market Momentum

MACD

0.68

Negative

RSI

64.64

Neutral

STOCH

80.38

Negative

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For FRO, the sentiment is Positive. The current price of 18.07 is above the 20-day moving average (MA) of 16.81, above the 50-day MA of 15.84, and below the 200-day MA of 18.10, indicating a neutral trend. The MACD of 0.68 indicates Negative momentum. The RSI at 64.64 is Neutral, neither overbought nor oversold. The STOCH value of 80.38 is Negative, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive sentiment for FRO.

Frontline Peers Comparison

Overall Rating

UnderperformOutperform

Sector (56)

Financial Indicators

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
DHT	84 Outperform	$1.83B	10.27	17.04%	8.35%	-5.32%	5.51%
TNK	81 Outperform	$1.57B	4.88	18.57%	2.19%	-21.27%	-34.25%
INSW	80 Outperform	$1.89B	5.93	17.57%	13.41%	-18.74%	-39.64%
STNG	78 Outperform	$2.14B	3.04	24.68%	3.82%	-7.25%	31.85%
FRO	75 Outperform	$3.97B	8.01	21.46%	9.78%	13.77%	-24.50%
TEN	73 Outperform	$548.62M	3.62	10.53%	8.24%	-9.61%	-43.91%
Sector *	56 Neutral	$7.25B	3.36	-3.66%	5.65%	0.66%	-50.71%

* Energy Sector Average

Performance Comparison

FRO

Frontline

18.32

-6.84

-27.19%

DHT

DHT Holdings

11.58

0.12

1.05%

STNG

Scorpio Tankers

42.07

-37.35

-47.03%

TNK

Teekay Tankers

45.89

-22.53

-32.93%

TEN

Tsakos Energy Navigation

18.20

-9.84

-35.09%

INSW

International Seaways

38.30

-18.06

-32.04%

Frontline Earnings Call Summary

Earnings Call Date:Feb 28, 2025

(Q4-2024)

% Change Since: 19.59%|

Next Earnings Date:May 30, 2025

Earnings Call Sentiment Neutral

The earnings call presented a mixed outlook for Frontline Ltd., with strong financial performance and cash generation potential offset by challenges in the geopolitical landscape and a decrease in adjusted profit. The tanker market shows potential for growth, but geopolitical uncertainties and declining global oil exports pose risks.

Q4-2024 Updates

Positive Updates

Profit and Strong Liquidity

Frontline Ltd. reported a profit of $66.7 million or $0.30 per share, with an adjusted profit of $45.1 million. The company has a strong liquidity position with $693 million in cash and cash equivalents.

Solid Fleet and No Newbuilding Commitments

Frontline Ltd.'s fleet consists of 41 VLCCs, 22 Suezmax tankers, and 18 LR2 tankers, with an average age of 6.6 years. 99% of the vessels are eco-vessels and 56% are scrubber-fitted. There are no newbuilding commitments and no meaningful debt maturities until 2028.

Substantial Cash Generation Potential

Frontline Ltd. has a cash generation potential of $447 million or $2.01 per share at current fleet and spot market earnings, with a 30% increase from current spot market potentially increasing cash generation by about 80%.

Stable Oil Supply and Demand

Global oil consumption averaged 103.4 million barrels in Q4, expected to reach 104.5 million barrels by year-end. Global supply was up 600,000 barrels per day, with OPEC maintaining production cuts.

Aging Fleet and Manageable Order Book

The average tanker fleet age is 13.7 years, with a significant portion expected to be replaced over the next five years. The order book is manageable, and fleet growth is expected to remain muted for 2025.

Negative Updates

Decrease in Adjusted Profit

The adjusted profit for the quarter decreased by about $30 million compared to the previous quarter, mainly due to a decrease in TCE earnings.

Decline in Global Oil Exports

Global oil exports were down 700,000 barrels per day in Q4, with a significant decline of 1.5 million barrels per day in Q4 2023 alone.

Geopolitical and Trade Challenges

The tanker industry faces challenges from geopolitical events, tariffs, sanctions, and the aging fleet. Sanctions and tariffs on countries like Mexico, Canada, China, and the EU could impact trade efficiency.

Impact of Sanctions on Iranian and Russian Oil

Iranian and Russian oil exports have been affected by sanctions, with Iranian crude backing up and complex trade dynamics impacting the compliant tanker fleet.

Company Guidance

In the fourth quarter of 2024, Frontline Ltd. provided guidance on its tanker fleet performance and financial health. The company achieved time charter equivalent (TCE) rates of $35,900 per day for its VLCC fleet, $33,400 per day for the Suezmax fleet, and $26,100 per day for the LR2/Aframax fleet. In the third quarter, 80% of VLCC days were booked at $43,700, 77% of Suezmax days at $35,400, and 64% of LR2/Aframax days at $29,700. Frontline reported a quarterly profit of $66.7 million or $0.30 per share, with an adjusted profit of $45.1 million or $0.20 per share, despite a $30 million decrease in TCE earnings compared to the previous quarter. The company maintained a strong liquidity position with $693 million in cash and cash equivalents and no significant debt maturities until 2028. The fleet, comprising 41 VLCCs, 22 Suezmax tankers, and 18 LR2 tankers, had an average age of 6.6 years, with 99% eco-vessels and 56% scrubber-fitted. Estimated cash cost breakeven rates for 2025 were $29,200 per day for VLCCs, $24,000 for Suezmax, and $22,200 for LR2s, with an average fleet estimate of $26,200 per day. Operational expenses for Q4 2024 averaged $7,600 per day for VLCCs, $9,100 for Suezmax, and $7,600 for LR2s. The company projected cash generation potential of $447 million or $2.01 per share, with a 30% increase in spot market rates potentially boosting cash generation by 80%.

Glossary

OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.

NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.

UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.

Disclaimer

This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.