Investing.com -- A.P. Moller-Maersk (OTC:AMKBY) shares jumped by 8% on Thursday after the company announced a new $2 billion share buyback program and a dividend of DKK 1,120 per share, implying a 10% yield.
The stronger-than-expected cash return boosted investor sentiment, even as the shipping giant forecasted weaker earnings for 2025 and projected negative free cash flow of at least $3 billion for the year.
Despite the upbeat reaction, analysts remain cautious about Maersk’s ability to sustain such returns, given market risks tied to freight rates and geopolitical developments.
The company’s financial guidance for 2025 projects EBITDA between $6 billion and $9 billion, slightly above consensus estimates of $6.6 billion.
The forecast hinges largely on developments in the Red Sea, with the lower end assuming a mid-year reopening of the trade route, while the upper bound factors in a prolonged disruption until the end of 2025.
Maersk reported a 24% year-over-year increase in revenue for 2024, beating analyst expectations by 12%. The company exceeded revenue projections across all divisions, with its Ocean segment driving a more than 300% surge in EBITDA.
Loaded freight rates came in 13% higher than anticipated, fueling strong financial performance. However, margins in the Logistics & Services division fell slightly short of expectations, with EBIT margin declining 1 percentage point in Q4 due to operational one-off costs in Last Mile services.
The company maintained its strategic goal of achieving a 6% EBIT margin in its Logistics and Services segment in 2025, but analysts at Morgan Stanley (NYSE:MS) noted that the margin weakness was disappointing given Maersk’s previous initiatives to strengthen this area.
While the company’s share buyback announcement supported its stock price, analysts remain skeptical about the sustainability of Maersk’s cash returns, especially in light of the company’s guidance for negative free cash flow in 2025.
The Red Sea situation remains fluid, and a sooner-than-expected reopening could pressure freight rates, potentially putting downward pressure on earnings.
Morgan Stanley analysts also warned of broader risks to global trade, including tariff uncertainties and weaker-than-expected volume growth.
While Maersk forecasts global container volume growth of 4% in 2025, some analysts have lower expectations, with Morgan Stanley estimating just 2% growth.
Despite a strong balance sheet and a shareholder-friendly capital return strategy, Maersk faces a challenging road ahead.
The shipping industry remains highly sensitive to geopolitical shifts, and concerns over freight rates and cash generation continue to weigh on the long-term outlook.