Scorpio Tankers stock holds $75 target, Buy rating at BTIG

On Thursday, Scorpio Tankers Inc . (NYSE:STNG) maintained its upward momentum following the reiteration of a Buy rating and a $75.00 price target by BTIG. The shipping company’s stock rose approximately 2% after posting earnings before the market opened, with EBITDA reaching around $105 million, excluding roughly $17 million of share-based compensation. This figure surpassed the consensus estimate of about $99 million by approximately 10%. With a market capitalization of $1.7 billion and impressive gross profit margins of 71.9%, Scorpio Tankers trades at an attractive P/E ratio of 2.7x. According to InvestingPro analysis, the stock currently appears undervalued based on its Fair Value assessment.

The positive earnings report was attributed to stronger-than-expected spot bookings during the quarter, contributing to revenues of approximately $204 million, which was slightly over 2% above consensus. Additionally, Scorpio Tankers managed to reduce its vessel operating costs by approximately 11% from the previous quarter. The company maintains a strong financial position with a current ratio of 2.43, indicating healthy liquidity. InvestingPro data reveals 14 key insights about STNG’s financial health, which currently rates as GREAT based on comprehensive analysis available in the Pro Research Report.

Looking ahead to the second quarter, Scorpio Tankers disclosed forward bookings for its spot fleet. Approximately 49% of Long Range 2 (LR2) tanker days have been fixed at an average rate of around $34,000, and about 41% of Medium Range (MR) tanker days at approximately $21,000. These rates are marginally higher than the spot earnings in the first quarter, where LR2s and MRs earned around $30,000 and $20,000, respectively. The current spot rates show MRs averaging around $26,000 in the Atlantic and about $18,000 in the Pacific, indicating that Scorpio’s MR tankers are trading at or above their quarter-to-date bookings. Meanwhile, LR2 rates from the Middle East to Asia are holding steady at about $26,000, with leading-edge rates tracking above $50,000. The company’s strong operational performance has supported its 13-year track record of consistent dividend payments, currently yielding 4.25%.

Scorpio Tankers has demonstrated a commitment to shareholder returns by distributing approximately $20 million this quarter through buybacks and dividends. This payout represents around 20% of the company’s operating cash flow. With a significant portion of the second quarter’s spot trading days still available for booking and rates trending above the bookings for the quarter to date, Scorpio Tankers is poised to continue its cash return strategy, with around $173 million remaining in its buyback program. The company’s robust financial position is reflected in its moderate debt levels and strong cash flow generation, with levered free cash flow of $825 million in the last twelve months. For deeper insights into STNG’s valuation and financial metrics, investors can access the comprehensive Pro Research Report available on InvestingPro.

In other recent news, Scorpio Tankers reported its fourth-quarter 2024 earnings, which revealed a significant miss on both earnings per share (EPS) and revenue expectations. The company posted an EPS of $0.63, falling short of the projected $1.68, and revenue of $203.97 million, below the forecasted $254.72 million. Despite these setbacks, Scorpio Tankers made strides in strengthening its financial position by reducing debt by $740 million and maintaining robust liquidity with $1.3 billion available. Analysts from BTIG adjusted their price target for the company to $75, down from $85, while maintaining a Buy rating, reflecting a positive outlook on the company’s strategic positioning in the product tanker market. Meanwhile, Stifel revised its price target to $44 from $49, maintaining a Hold rating, citing market uncertainties despite the company’s respectable performance in early 2025. Scorpio Tankers’ strategic moves, such as chartering out vessels to replace expiring contracts, have been noted as enhancing cash flow visibility. The company declared a $0.40 dividend, translating to a payout of roughly 31% of its operating cash flow. Looking forward, BTIG anticipates a rebound in product tanker rates, expecting an average increase of 10%-15% in Q1 and an additional 5%-10% in Q2.

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