On Thursday, Deutsche Bank maintained a Buy rating on Scorpio Tankers (NYSE:STNG) and increased the stock price target to $87 from the previous $80. The adjustment follows Scorpio Tankers' announcement of adjusted first-quarter 2024 earnings per share (EPS) of $4.14, surpassing both the street consensus and Deutsche Bank's estimate of approximately $3.70. The better-than-expected performance was attributed to higher revenues and lower interest expenses.
The company also disclosed the sale of two medium-range (MR) tankers, one built in 2015 and the other in 2013, for $40.8 million and $36.15 million, respectively. Both vessels were sold without any associated debt, allowing the company to retain the full sales proceeds.
Moreover, Scorpio Tankers finalized the sales of another 2013-built MR tanker and a 2015-built MR tanker for $36.15 million and $39.1 million, respectively.
Scorpio Tankers may consider selling more of its older tanker assets if it receives attractive offers. The company has already secured contracts for a significant portion of its available vessel days for various classes of tankers.
Specifically, 53% of its open Long Range 2 (LR2) days have been booked at a rate of $51,700 per day, 51% of its open MR days at $38,000 per day, and 48% of its open Handymax days at $25,000 per day.
The positive outlook for the tanker market and the potential for Scorpio Tankers to undertake substantial share repurchases in the near future were cited as reasons for Deutsche Bank's reiterated Buy rating and price target increase.
InvestingPro Insights
Following the upbeat earnings report and Deutsche Bank's renewed confidence in Scorpio Tankers (NYSE:STNG), InvestingPro data reveals additional reasons for investor optimism.
With an adjusted P/E ratio of 6.84, Scorpio Tankers is trading at a valuation that could be attractive to value investors, especially when considering the company's impressive gross profit margin of 75.48% over the last twelve months as of Q4 2023. This margin is a testament to the company's operational efficiency and could signal further upside potential.
Moreover, the company's aggressive share buyback strategy, as highlighted by one of the InvestingPro Tips, is a strong signal of management's confidence in the firm's value. This is complemented by a substantial dividend yield of 2.12%, which has seen a remarkable growth of 300% in the same period, rewarding long-term shareholders. The company's share price is also trading near its 52-week high, at 99.3% of the peak, reflecting strong market sentiment.
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