ECO Stock: 12.6%-Yielder Crushing Broader Market
August 22, 2024
Okeanis Eco Tankers Stock Has 45% Upside
ECO stock is a very interesting marine shipping stock that I want to bring to my readers’ attention.
Marine shipping companies like Okeanis Eco Tankers Corp (NYSE:ECO) make money transporting crude oil around the world. How much money they make depends on the time charter equivalent rates (TCEs). That’s a measure of how much money a vessel makes on a daily basis.
TCE rates soared in the first half of 2024 on the heels of the Red Sea crisis. Trade has also been better than expected. And the need for additional vessels for Africa Cape diversions due to the Red Sea crisis means unaffected areas are struggling to find extra capacity.
While these issues will eventually be resolved, the outlook for the tanker industry looks solid, with analysts saying that the tanker market should remain healthy and profitable over the long run, too, past 2030. (Source: “Tanker Rates Could Remain Elevated Even After 2030,” Hellenic Shipping News, June 21, 2024.)
Even after a so-called peak in oil demand, the total volume of crude oil shipped is expected to remain substantial. The existing fleet of crude oil tankers is aging, and stricter environmental regulations will impact the operational efficiency of older vessels. A large number of tankers are engaged in sanctioned trades, too, which further limits available capacity. All of this points to a strong global crude tanker market for years to come, which should continue to be a boon for Okeanis Eco Tankers.
Okeanis is an international shipping company that operates in the crude oil industry. Its fleet currently consists of six modern Suezmax and eight modern Very Large Crude Carriers (VLCC) tankers. (Source: “Our Business,” Okeanis Eco Tankers Corp, last accessed August 13, 2024.)
The company’s 14 vessels have an average age of four years and aggregate capacity of approximately 3.5 million deadweight tons.
Second-Quarter Earnings Beat
For the second quarter ended June 30, 2024, Okeanis reported revenue of $112.0 million, down slightly from $119.8 million in the second quarter of 2023. (Source: “Okeanis Eco Tankers Corp. – Unaudited Condensed Financial Statements for the Second Quarter and Six-Month Period of 2024,” Okeanis Eco Tankers Corp, August 9, 2024.)
The company reported second-quarter net income of $39.6 million, or $1.23 per share. This topped Wall Street calls for second-quarter 2024 earnings of $0.88 per share.
Fleetwide TCE rates in the second quarter were $64,900 per operating day. Daily vessel operating expenses were $9,389. In the previous quarter, daily TCE rates were $63,300 with daily operating expenses of $9,208.
When Okeanis reported its second-quarter results on August 9, 58% of available VLCC spots were booked for the third quarter at an average TCE rate of $46,100, and 53% of available Suezmax spots were booked at an average TCE rate of $58,000 per day.
100% of Free Cash Flow Distributed
Okeanis Eco Tankers’ quarterly distribution varies because the payout is based on its free cash flow (FCF). And it distributes approximately 100% of its FCF.
In August, the company’s board declared a second-quarter dividend of $1.10 per share, or $3.86 per share on an annual basis, for a current yield of 12.6%.
ECO Stock Trumps Broader Market
Okeanis is home to a reliable dividend, and ECO stock has also been rewarding buy-and-hold investors. Currently trading at $30.23, ECO shares are up 18.5% year to date and $53.2% year over year.
Wall Street expects ECO stock to hit fresh highs over the coming quarters, with analysts providing a 12-month share price target of $44.00. This points to potential upside of 45.5% and a 19% increase over the stock’s June 2024 record high of $35.66.
Chart courtesy of StockCharts.com
The Lowdown on ECO Stock
ECO stock continues to be a great marine shipping stock, with Okeanis reporting solid financial results, including strong TCE rates.
Looking ahead, the overall market has been very strong in the first half of 2024, with longer voyages and increased vessel demand. The longer-term outlook for the crude tanker market, beyond 2030, looks promising too.
This of course bodes well for Okeanis stock’s ultra-high-yield dividend and share price.
