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Investing.com - BTIG lowered its price target on Ship Finance International (NYSE:SFL) to $10.00 from $12.00 on Tuesday, while maintaining a Buy rating on the shipping company’s stock. Currently trading at $7.87, InvestingPro analysis suggests the stock is fairly valued, with a Financial Health Score of 2.21 (FAIR).
The price target reduction follows SFL’s second-quarter earnings report, which showed adjusted EBITDA of approximately $104 million, about 7% above consensus estimates of $97 million. Despite beating expectations, EBITDA declined approximately 10% sequentially and 21% year-over-year, primarily due to the Hercules drilling rig remaining warm stacked and several vessels entering scheduled drydock. InvestingPro data reveals impressive gross profit margins of 60.37%, though the company is currently dealing with significant debt obligations.
SFL reported an operating EPS loss of $0.01, excluding a $4 million gain on vessel sales, which surpassed the consensus estimate of -$0.05. The company announced a dividend cut of approximately 26% to $0.20, representing about 45% of operating cash flow and implying an annualized yield of approximately 9%. Despite the recent cut, InvestingPro notes that SFL has maintained dividend payments for 22 consecutive years, though it’s currently burning through cash rapidly. Get access to 12 more exclusive InvestingPro Tips about SFL’s financial outlook and market position.
During the second quarter, SFL sold three approximately 15-year-old Supramax vessels for around $45 million, with the final vessel scheduled for delivery later in the third quarter. The company also delivered eight Capesize vessels to Golden Ocean (NASDAQ:GOGL) for approximately $115 million following Golden Ocean’s exercise of purchase options.
SFL additionally redelivered six containerships to MSC during the second quarter under a chartering agreement, with one more vessel delivered after the quarter ended. BTIG noted that vessel redeliveries and a soft drilling market are weighing on near-term cash flows, prompting the dividend reduction.
In other recent news, SFL Corporation announced a reduction in its quarterly dividend, lowering it to $0.20 per share from the previous $0.27. This decision was attributed to challenges in the drilling rig market and a reduction in near-term cash flow. The company reported second quarter earnings per share of $0.01, which exceeded analyst expectations of a $0.05 loss. Revenue for the quarter was $192.58 million, slightly surpassing the consensus estimate of $192.4 million. Despite these positive earnings and revenue figures, the focus remained on the dividend cut. The company cited market uncertainty and oil price volatility affecting its Hercules drilling rig as key factors for the dividend adjustment. Analysts continue to monitor these developments closely, considering the implications for the company’s financial strategy. These recent updates highlight the ongoing challenges faced by SFL Corporation in the current market environment.
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