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4 Shipping Stocks to Take Off on Likely Q1 Earnings Beat

The Q1 earnings season is in its last leg with majority of the companies having already unveiled their quarterly financial numbers. The picture that has emerged so far is quite encouraging and the Q1 earnings season remains on track to end on a strong note, displaying substantial growth.

According to our latest Earnings Preview, total earnings and revenues for companies in the S&P 500 space are projected to expand 12.7% and 6.2%, both on a year-over-year basis.  In fact, both figures compare favorably with the readings in Q4, when bottom line expanded 7.3% and revenues grew 4.7%. The progress in the quarterly performance can be attributed to a turnaround in the economy and improved job market scenario, among other factors.

With the overall scenario so bright, it is of little wonder that 12 of the 16 Zacks sectors are projected to end the quarter with their bottom line expanded. Unfortunately, the highly-diversified transportation sector is not one of them. With reports available from the entire S&P500 transportation fraternity, the sector has cut a sorry figure. The bottom line has contracted 17.9% for these companies due to higher costs. Apart from increased labor expenses, the uptick in fuel costs has also distorted the earnings picture for transports in the current reporting cycle.

Shippers to the Rescue

Even though the overall transportation sector is struggling, shipping stocks offer a glimmer of hope. The surge in the Baltic Dry Index (a gauge of the shipping costs of raw materials such as iron ore, coal and grain) earlier this year is testimony to the fact that shipping stocks are on their way up after struggling for quite some time.
In fact we have already seen stocks in the space like Eagle Bulk Shipping Inc. (EGLE) and Gener8 Maritime (GNRT) outperform with respect to the bottom-line.

Favorable Industry Rank

The favorable Zacks Industry Rank of 107 carried by the 49 member Zacks-categorized Transportation- Shipping further augments the good times for shipping stocks. In fact, the favorable rank places the industry in the top 42% of the 250+ groups enlisted.

The Rank of this division compares favorably to those of most other Zacks-categorized transportation sub-groups. Notably, the Zacks Industry Ranks for the Transportation-Airline, Transportation-Truck, Transportation-Services, and the Transportation-Air Freight and Cargo, sub-groups are 184,248, 164 and 219 respectively.

How to Pick the Winners?

In view of the bullish sentiment surrounding shipping stocks, it would not be a bad idea to add companies from the space, with the potential of reporting better- than-expected earnings in Q1, to one’s portfolio. An earnings beat more often than not boosts investor confidence in the stocks, which translates into rapid price appreciation.

However, given the high degree of diversity in the shipping space, the task is by no means easy. In fact, it is akin to searching for ‘a needle in a haystack’. Here our proprietary methodology comes in handy. It advises investors to look for stocks that have the combination of a favorable Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) and a positive Earnings ESP.

You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Earnings ESP is our proprietary methodology for identifying stocks that have high chances of surprising in their next earnings announcement. It shows the percentage difference between the Most Accurate estimate and the Zacks Consensus Estimate.
 
Our research shows that for stocks with this combination, the chance of a positive earnings surprise is as high as 70%.
 
4 Shipping Outperformers

With the aid of the above methodology, we hereby present four shipping stocks that are expected to outshine earnings estimates in their upcoming releases.

Star Bulk Carriers Corp. (SBLK) is a Greece-based leading global shipping company in the dry bulk sector. The carrier has an Earnings ESP of +45.46% and Zacks Rank #2.  Star Bulk is scheduled to reveal its results on May 24.   You can see the complete list of today’s Zacks #1 Rank stocks here.

Teekay LNG Partners L.P. (TGP), based in Hamilton Bermuda, is a provider of marine transportation services for liquefied natural gas, liquefied petroleum gas and crude oil across the globe. This Zacks Rank #3 shipping stock currently has an Earnings ESP of +8.33%. The company is scheduled to release its first quarter 2017 results on May 18.

Diana Shipping Inc. (DSX), based in Athens, Greece, specializes in the ownership of dry bulk vessels. This Zacks Rank #3 shipping stock currently has an Earnings ESP of +2.7%. The company will report its first-quarter 2017 results on May 23.

Ship Finance International Limited (SFL), which is based in Hamilton, Bermuda, boasts one of the largest fleet in the world and most of the vessels are employed on medium- or long-term charters. It carries a Zacks Rank #3 and an Earnings ESP of +6.25%. The company is expected to release its first-quarter 2017 results on May 30.

The Best & Worst of Zacks

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Star Bulk Carriers Corp. (SBLK): Free Stock Analysis Report
 
Diana Shipping inc. (DSX): Free Stock Analysis Report
 
Teekay LNG Partners L.P. (TGP): Free Stock Analysis Report
 
Ship Finance International Limited (SFL): Free Stock Analysis Report
 
Eagle Bulk Shipping Inc. (EGLE): Free Stock Analysis Report
 
Gener8 Maritime, Inc. (GNRT): Free Stock Analysis Report
 
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