ZIM Integrated Shipping shares at 13-month highs as freight rates rise📈

Shares of Israeli freight company ZIM Integrated Shipping (ZIM.US) are having another successful session today, gaining nearly 8%. The company continues to be supported by solid macro data from the global economy. The company recently reported results that fell short of expectations but forecast a renewed dividend payment in 2024, which boosted investor sentiment. As a result, the stock is trading near a 120% rally from this year's lows and has already gained nearly 90% since the beginning of the year. 

• The company, in a commentary on its Q1 2024 results, indicated that it expects freight rates to be higher, for longer, than it had previously anticipated. The Q1 results came out at a net profit of $92 million, compared to a loss of $58 million in Q1 2023 and a loss of $147 million in Q4 2023. ZIM transported 846,000 TEUs, 10% more y/y and 8% k/k. Spot and contract rates rose to $2904 per feu and were 5% higher y/y and 32% k/k.  They also increased 42% against Q1 2019.
• ZIM is the 9th largest ocean carrier by tonnage, but the company's shares regularly trade with the highest daily volume of any container line operator in the world. The company's CEO, Glickman indicated that the company probably avoided the worst-case scenario that could have happened in 2024. The company expects EBIT of $1.15 to $1.55 billion, compared to $850 million-$1.45 billion previously. Adjusted EBIT is expected to be in the range of $0 to $400 million in 2024, compared to previous estimates of -$300 million to $300 million.

Freight freight rates on major trade routes are showing significant growth on both a weekly and annual basis. This, along with solid global PMI and a recovery in China, creates upside potential for freight stocks, which have been oversold in recent quarters. Source: Drewry Shipping

Freight rates rose in February fueled by Huti attacks in the Red Sea, but the rebound is now gaining more fundamental ground, amid the prospect of a slow recovery in China's economy and solid PMI data from the US and Europe. Source: Drewry

ZIM freight rates have seen a renewed, significant increase. Source: Lloydlist, ZIM

Zim saw a significant improvement in Q1 2024, higher full-year forecasts and the return of dividends reduced the fear caused by not meeting forecasts. The company reported adjusted earnings per share of $0.75, below consensus of $0.98 (Jefferies estimate of $1.22 per share).

• ZIM remains focused on spot trading, which analysts believe could increase its attractiveness as a leveraged company providing exposure to betting on macro and geopolitical events.
• Frma intends to increase its exposure to spot transoceanic rates, rather than contract rates by raising 'leverage' on the business. Transoceanic exposure to spot rates was 65% in Q1 versus 50% 'traditional', and comments from CFO, Destriau indicate that the company intends to maintain its strategy and is confident of its success.
• As a result, the contracted portion of ZIM's business will be 'only 35%,' although the company believes this decision is still relatively conservative given the improving picture for freight rates and the rebuilding of inventories at many companies.

ZIM stock chart (H4)

Source: xStation5