jwesth @jwesth: "𝙈𝙖𝙚𝙧𝙨𝙠 𝙨𝙝𝙖𝙧𝙚𝙨 𝙛𝙖𝙡𝙡 𝙩𝙤𝙙𝙖𝙮 𝙙𝙚𝙨𝙥𝙞𝙩𝙚..."

United Kingdom

𝙈𝙖𝙚𝙧𝙨𝙠 𝙨𝙝𝙖𝙧𝙚𝙨 𝙛𝙖𝙡𝙡 𝙩𝙤𝙙𝙖𝙮 𝙙𝙚𝙨𝙥𝙞𝙩𝙚 𝙬𝙝𝙖𝙩 𝙤𝙣 𝙩𝙝𝙚 𝙨𝙪𝙧𝙛𝙖𝙘𝙚 𝙖𝙥𝙥𝙚𝙖𝙧𝙨 𝙩𝙤 𝙗𝙚 𝙖 𝙜𝙤𝙤𝙙 𝙨𝙩𝙖𝙧𝙩 𝙩𝙤 𝟮𝟬𝟮𝟰 🚢 This morning, shipping giant $MAERSKB.CO (A P Moller Maersk) delivered a result that on the surface seems like a reasonable start to 2024 in an industry facing major challenges. Maersk reported strong revenue of 12.4bn dollars and a small operating profit of 177m dollars, which fell within analysts' expectations. So there were no major disappointments here. 🧑‍💼 Maersk's management also raised their previously rather gloomy guidance for 2024 of an operating loss (EBIT) of between -5bn and 0bn dollars. It is positive that they are now raising the lower limit and guiding a more limited loss in the range of -2bn and 0bn dollars. However, this does not seem to reassure investors, who sent the share price down by around 5% in the wake of the report. 📉 📈 Investors have noticed that freight rates have started to stabilise over the past few weeks, and some had begun to speculate that they could remain at this level for some time. In doing so, they were looking forward to what could be a more favourable uplift to Maersk 2024 guidance. However, Maersk's announcement today, which still can see an operating loss in 2024, suggests that freight rates still need to come down from here. This may have disappointed some investors. 🌍 The conflict in the Red Sea has helped to keep freight rates under control. The approximately ten days longer sailing time south of Africa than through the Red Sea has led to a reduction in container capacity. This has reduced competition in the otherwise highly competitive market, where Maersk is largely a price taker. ⚠️ But this temporary situation is being overtaken by the general overcapacity that already exists in the container market, which could become even greater as we get further into the year. Maritime research firm Drewry expects significant industry overcapacity of up to 25% by 2024, which could put pressure on freight rates and Maersk's earnings from here. 💡 But that doesn't necessarily mean that the Maersk stock needs to go on the bench. The shipping giant is well-prepared for uncertain times with lower freight rates and has done it many times before. Even after paying a dividend of DKK 515 per share in March, Maersk's balance sheet is strong with significant cash reserves. It's typical for companies in this highly cyclical industry to experience years of losses, but also strong earnings in the good years. We need only look back to 2021 and 2022, when Maersk saw significant earnings in a market with massive container undercapacity and sky-high freight rates. $DSV.CO (DSV A/S) $HLAG.DE (Hapag-Lloyd) $ZIM (ZIM Shipping Services Ltd) $KNIN.ZU (Kuehne & Nagel International AG)

5 Mentioned

MAERSKB.CO

A P Moller Maersk

DSV.CO

DSV A/S

HLAG.DE

Hapag-Lloyd

ZIM

ZIM Shipping Services Ltd

KNIN.ZU

Kuehne & Nagel International AG