It's a complex time for the global shipping industry. On one hand, demand for products across multiple categories continues to spike, and a recent report has suggested the industry will grow at a CAGR of nearly 5% for the next seven years; on the other hand, an increasingly uncertain trade landscape could elevate costs and force changes to routes and other operations in 2025.
Several major shipping companies are at or close to a 52-week low, which could present an opportunity to buy in while shares are relatively cheap for investors optimistic about prospects in the new year and beyond. Among these bargain firms are companies like Hafnia Ltd. (NYSE: HAFN) and Frontline plc (NYSE: FRO), two global shipping companies with shares down 10.5% and 26.0%, respectively, in the year leading to December 12, 2024.
If these companies have seen share prices decline in recent months, why might investors choose to look at them now? Revenue growth is a key factor. Both Hafnia and Frontline above and their rival Seanergy Maritime Holdings Corp. (NASDAQ: SHIP) have trailed 12-month revenue growth at the top of the shipping industry. By this metric, these three firms are already leading their competitors, and if the shipping industry gets a boost as some analysts predict, they could be among the largest beneficiaries.
Hafnia: Stock Buyback From an Analyst Favorite
Hafnia is a Bermuda-based oil tanker company specializing in clean petroleum product trade, or the shipment of refined, "lighter" products such as gasoline. The clean product trade typically uses a different type of ship than so-called "heavier" products like crude oil, allowing firms like Hafnia to stand out from many of their competitors.
However, it is possible for crude tankers to enter the clean product trade, and an influx of them in recent months may have contributed to a substantial drop in shipping charter rates—and a subsequent sell-off of HAFN shares, which have fallen by more than a third in the six months leading to December 12, 2024.
Hafnia executives have determined this is a good time to reallocate capital toward share buybacks instead of stockholder dividends. The company launched on December 2 a short-term buyback program that only extends through late January and covers purchases totaling as much as $100 million in stock. The buyback will improve dividend yield for shareholders going forward and also help to boost cash yield.
HAFN's trailing 12-month year-over-year (YoY) revenue growth of 52.2% has also contributed to analyst interest. The firm is currently rated a Buy with an upside potential of nearly 90% over the current share price.
Frontline: Strong Value Prospects
Frontline has an even stronger trailing 12-month YoY revenue performance than Hafnia, as the firm's top line improved by 83% during that timeframe. However, the firm saw share prices fall after the company failed to meet analyst predictions in its third-quarter earnings report earlier in the fall, despite growth relative to the prior-year quarter. Revenue of more than $490 million actually beat out analyst expectations despite a decrease in spot contract prices.
As a global firm and one of the world's largest shipping companies, Frontline is heavily impacted by geopolitics. With oil-exporting countries in the Middle East holding on to more products as a result of domestic demand increases as well as lower demand in Asia, Frontline faced headwinds in recent months.
With share prices down, though, Frontline now stands out as a value proposition for investors with a longer investment horizon. The firm has a P/S ratio of just 1.5 and a forward P/E ratio of 7.5.
Seanergy: High Dividend Yield, Expected Growth in Demand
Seanergy is a major dry bulk shipping firm operating a fleet of Capesize tankers. The firm has long been a draw for dividend investors thanks to its 14.2% dividend yield, but it has seen renewed interest lately thanks to better-than-expected earnings results and an increase to its dividend.
The anticipated continued growth in demand for iron ore globally and particularly in Asia is likely to fuel further revenue growth for this company, which already has trailing 12-month YoY revenue gains of 66.3%.
These factors have contributed to analysts' decision to name Seanergy a Strong Buy with upside potential of 70.8% over current price levels.
