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On Thursday, BofA Securities updated its outlook on ZIM Integrated Shipping Services (NYSE:ZIM), raising the price target to $15.90 from $13.70, while the Underperform rating remains unchanged. The adjustment comes following an increase in the firm's 2024 earnings before interest, taxes, depreciation, and amortization (EBITDA) estimate by 18% to $3.5 billion and earnings before interest and taxes (EBIT) to $2.4 billion. These figures are at the upper end of the company's guidance.
The upward revision of the price target is attributed to a 10% and 12% increase in projected fourth-quarter volumes and rates, respectively. This also includes the reflection of ZIM's third-quarter performance, which surpassed expectations. ZIM has recently updated its 2024 adjusted EBITDA guidance to a range of $3.3 billion to $3.6 billion and its adjusted EBIT guidance to $2.15 billion to $2.45 billion, citing a slower-than-anticipated decline in freight rates.
In the fourth quarter, ZIM anticipates a slight quarter-over-quarter volume growth due to new capacity additions, alongside a lower average freight rate compared to the previous quarter. BofA Securities' revised price objective to $15.90 is also a result of rolling out valuation to 2025 and applying a reduced price-to-book (P/B) target multiple of 0.5x, down from 0.55x.
The new price target implies a potential total return of negative 20%, including dividends, according to the analyst's note. Despite the raised price target, the firm's Underperform rating indicates a cautious stance on ZIM's stock performance going forward.
In other recent news, ZIM Integrated Shipping Services reported third-quarter earnings that exceeded expectations, leading to an upward revision of its full-year guidance. The company reported an adjusted EBITDA of $1.53 billion, surpassing the consensus estimate of $1.24 billion. In addition, ZIM's third-quarter earnings per share were $9.34, outperforming the analyst consensus estimate of $6.95. This performance was largely attributed to higher-than-expected freight rates and a year-over-year increase in cargo volumes of approximately 12%.
Despite these strong results, Citi maintained its Sell rating on ZIM shares, holding steady at a price target of $14.00. ZIM also declared a regular dividend of $2.81 per share, supplemented by a special dividend of $0.84 per share, totaling $3.65 per share.
InvestingPro Insights
ZIM Integrated Shipping Services has shown remarkable resilience in a challenging market, as reflected in the recent BofA Securities update. This is further supported by InvestingPro data, which reveals a significant YTD Price Total (EPA:TTEF) Return of 190.7% and a 1 Year Price Total Return of 313.43%. These figures underscore the stock's strong performance, aligning with the analyst's increased EBITDA and EBIT estimates for 2024.
InvestingPro Tips highlight that ZIM pays a significant dividend to shareholders, with a current Dividend Yield of 13.77%. This high yield could be attractive to income-focused investors, despite the recent Dividend Growth decline of 85.47% in the last twelve months.
It's worth noting that while BofA Securities maintains an Underperform rating, InvestingPro data shows a Price % of 52 Week High at 79.27%, suggesting the stock has been trading near its peak levels. This, combined with the InvestingPro Tip that the stock's RSI suggests it's in overbought territory, may explain the analyst's cautious stance despite the raised price target.
For investors seeking a more comprehensive analysis, InvestingPro offers 12 additional tips for ZIM, providing a deeper understanding of the company's financial health and market position.
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