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On Thursday, BofA Securities analyst Ken Hoexter adjusted the price target for Scorpio Tankers (NYSE:STNG) stock, increasing it to $52.00 from the previous $49.00 while keeping a Neutral rating on the shares. According to InvestingPro analysis, the stock appears undervalued at current levels, with the company maintaining an impressive financial health score of "GREAT." The adjustment comes after Scorpio Tankers reported its fourth-quarter earnings for 2024, which showed an adjusted EPS of $0.63. This figure represents a 77% decrease from the previous year but still exceeded BofA’s estimate of $0.49 and matched the consensus estimate of $0.63.
The reported EPS was notably higher than earlier analyst expectations, which had dropped significantly from $2.91 on October 19, 2024, to $1.48 by January 7, 2025, before finally settling at $0.63 as of February 4, 2025. Scorpio Tankers’ fleet time-charter equivalent (TCE) rate for the fourth quarter stood at $21,978 per day, aligning closely with BofA’s forecast of $21,984 per day.
The TCE rates for Scorpio Tankers experienced a year-over-year decline of 33% in the fourth quarter due to a surplus of oil products in Europe, softer macroeconomic conditions, and increased refinery maintenance. Despite this, Scorpio Tankers has secured bookings for a significant portion of its spot LR2, MR, and Handymax Revenue Days for the first quarter of 2025 at rates that are just below BofA’s full-quarter forecasts.
In response to the current market conditions, Scorpio Tankers has made a strategic move by purchasing approximately $42 million in shares of crude tanker DHT in January, with the aim of leveraging the anticipated improvements in the tanker market. This investment has increased Scorpio Tankers’ stake in DHT to 7.4%, representing an open market value of around $128 million.
Looking ahead, BofA maintains its full first-quarter estimates for LR2 and MRs but has reduced its forecast for Handymax to $18.8k per day from $21k per day. As a result, the firm has lowered its average TCE rate prediction for the first quarter of 2025 by 2%, setting it at $26,596 per day. The broader analyst consensus remains optimistic, with a "Buy" recommendation and targets ranging from $51 to $108 per share. Access the complete Pro Research Report and detailed financial analysis for STNG, along with 1,400+ other stocks, through InvestingPro.
In other recent news, Scorpio Tankers (NYSE: STNG) secured a $500 million revolving credit facility from a consortium of financial institutions, maturing seven years from the signing date. The company also announced an agreement to sell one of its MR tankers in the fourth quarter of 2024. On another note, Jefferies, a global investment banking firm, adjusted its outlook on Scorpio Tankers, reducing the price target to $75 from the previous $80 while maintaining a Buy rating on the stock.
In other developments, US-based shipping companies experienced a surge in their stocks following the US government’s decision to blacklist China’s Cosco Shipping Holdings Co. and two shipbuilders over alleged ties with the People’s Liberation Army. This move is expected to increase scrutiny of marine transport and shipbuilding sectors. Among the companies, DHT Holdings (NYSE:DHT) led the gains, followed by Scorpio Tankers, Teekay Tankers Ltd (NYSE:TNK), International Seaways (NYSE:INSW), and Nordic American Tanker (NYSE:NAT).
These are recent developments that provide an insight into the current state of affairs in the shipping industry. Investors are encouraged to keep a close eye on these events as they unfold.
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