Oil tankers are facing rough waters in the Strait of Hormuz again. The U.S. and Iran have both stepped up attacks on ships in the region. As a result, crude oil prices jumped above $100 per barrel, and traffic through the strait declined sharply again.
It's clear the threat of attack has made shipping commodities through the Strait of Hormuz a risky venture. Some shipping companies have even opted to avoid the Strait of Hormuz altogether, choosing instead to sail across the Indian Ocean, around the southern tip of Africa, up through the Mediterranean Sea and then down the Suez Canal into the Red Sea. The longer route has tripled travel time from 20 days to 60 days.
Longer routes may be bad for manufacturers shipping products, but they are great for shipping companies. Longer routes combined with elevated rates mean tanker companies may achieve record earnings. Here are some tantalizing buys based on my scoring system.
The average time charter equivalent (TCE) rate for very large crude carriers (VLCCs) surged to more than $120,000 per day, while TCE rates for Suezmax and Aframax vessels average about $77,000 and $58,000 per day, respectively. Okeanis Eco Tankers was locking in even higher rates. In fact, at the start of the second quarter, the company had an average TCE rate of $223,900 per day for its fleet of VLCCs, and it also booked an average TCE rate of $187,300 per day for its Suezmax vessels.
Related: Louis Navellier: Don't fear the Fed As a result, Okeanis Eco Tankers achieved blowout results in its second quarter. Revenue soared 239.6% year-over-year to $318.9 million, while earnings surged 602.4% year-over-year to $5.90 per share. Following the massive earnings and revenue beat, analysts revised third-quarter earnings estimates a whopping 305.5% higher.
Positive earnings revisions typically precede future earnings surprises. So, don't be surprised if Okeanis Eco Tankers posts its fifth-straight quarterly earnings surprise. My stock grading system rates ECO as an A and is a Conservative buy below $80.
Extract — continue reading at the source.
