On Friday, BofA Securities adjusted its stock price target for Scorpio Tankers (NYSE:STNG), raising it to $82 from the previous target of $76, while maintaining a Neutral rating on the stock. The revision followed Scorpio Tankers' first quarter 2024 earnings report, which reflected a year-over-year increase of 20% in adjusted earnings per share (EPS) to $3.97.
This figure surpassed both the firm's estimate of $3.81 and the consensus estimate of $3.70.
The earnings beat was attributed to a lower number of drydock offhire days than anticipated, totaling 204 days compared to the expected 305, based on over 10,000 available ship operating days. This reduced downtime contributed an additional $5 million to the company's revenue. Moreover, Scorpio Tankers reported $3 million less in interest expenses than projected by the analyst.
In terms of operational performance, the company's fleet time-charter equivalent (TCE) for the first quarter stood at $39,660 per day. This rate was closely aligned with the analyst's target of $39,996 per day.
The consistent TCE rates were supported by several industry factors, including low refined product inventories, refining capacity dislocations, geopolitical supply chain disruptions, and sustained demand for ton-mile transportation, all contributing to the product tanker market's dynamics.
Looking ahead, second-quarter-to-date TCE rates have remained high, defying typical seasonal patterns, in light of a tight supply situation while demand continues to rise. Scorpio Tankers has secured bookings for a significant portion of its spot vessel days, with rates for its LR-2, MR, and Handymax classes outperforming previous estimates.
Specifically, 53% of LR-2, 51% of MR, and 48% of Handymax Revenue Days were booked at daily rates of $51,700, $38,500, and $25,500, respectively. These rates are notably higher than the prior targets of $42,300 for LR-2 and $32,300 for MR, with Handymax rates now adjusted to new targets of $49,400, $35,700, and $24,100 per day.
InvestingPro Insights
With Scorpio Tankers' (NYSE:STNG) strong performance in focus, InvestingPro data provides a deeper dive into the company's financial health and market position. Notably, STNG boasts a robust gross profit margin of 75.7% over the last twelve months as of Q1 2024, signaling efficiency in its operations and a strong competitive edge.
Investors may also find the company's P/E ratio of 7.37 appealing, as it suggests that the stock is trading at a relatively low earnings multiple, potentially indicating an undervalued investment opportunity. Moreover, the company's market capitalization stands at $3.83 billion USD, reflecting its substantial presence in the industry.
On the strategic front, InvestingPro Tips highlight Scorpio Tankers' aggressive share buyback strategy and a high shareholder yield, which are key factors that can drive long-term value for investors. The company's commitment to maintaining dividend payments for 12 consecutive years underscores its financial stability and dedication to returning value to shareholders.
Furthermore, with 4 analysts revising their earnings upwards for the upcoming period, there is an optimistic outlook for STNG's future performance. For those interested in more in-depth analysis and additional insights, InvestingPro offers even more tips, which can be accessed at https://www.investing.com/pro/STNG.
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