Why Zim Integrated Shipping Stock Is Down Big Today


Zim Integrated Shipping Services (NYSE: ZIM) reported fourth-quarter results that were slightly above expectations, but there is no end in sight to the macro headwinds that have plagued this business. Investors were hoping for more, and Zim shares were down nearly 14% as of 11:30 ET Wednesday.

Zim is treading water

Zim owns and operates a fleet of cargo ships. This is a cyclical business, and 2023 was a difficult year. Concerns about the global economy and higher interest rates led big shipping customers to cut back on cargo volumes, which depressed prices for shipping services.

Investors have worried that Zim is particularly vulnerable to a downturn because of its relatively high debt load.

Zim lost $1.23 per share in the fourth quarter on revenue of $1.21 billion, beating Wall Street’s forecast for a $1.29 loss per share on sales of $1.28 billion. Revenue was down 45% in the quarter and down 59% in 2023, a reflection of poor demand.

CEO Eli Glickman said in a statement, “Against a backdrop of weakened market conditions, industry disruptions and operational challenges in 2023, ZIM’s exceptional team of professionals remained resilient and intently focused on achieving operational excellence and delivering the highest level of care for our valued customers.”

Zim is not predicting a quick turnaround. The company is forecasting adjusted earnings before interest, taxes, depreciation, and amortization between $850 million and $1.45 billion in 2024, compared to Wall Street’s $1.207 billion estimate and $1.049 billion in 2023.

Backing out depreciation and amortization, the company is forecasting a range of between a $300 million loss and $300 million profit in 2024.

Is Zim stock a buy after its fourth-quarter results?

Glickman said the company’s fleet renewal program, which is removing older, less fuel-efficient ships in favor of new ones is progressing as planned. That’s good news for efficiency but is the reason for the debt concerns. Total cash decreased by $1.92 billion last year to $2.69 billion, and Zim’s net leverage ratio as of year’s end was 2.2 times cash.

Investors had hoped that the geopolitical issues in the Middle East, including the partial closure of the Suez Canal, would lead to rates spiking higher and help reverse some of 2023’s pricing declines. But after an initial burst of optimism, it has become clear the situation is much more complicated.

For now, Zim is a wait-and-see story. There’s no reason to rush in and buy this dip.

Should you invest $1,000 in Zim Integrated Shipping Services right now?

Before you buy stock in Zim Integrated Shipping Services, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Zim Integrated Shipping Services wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. The Stock Advisor service has more than tripled the return of S&P 500 since 2002*.

See the 10 stocks

*Stock Advisor returns as of March 11, 2024

Lou Whiteman has no position in any of the stocks mentioned. The Motley Fool recommends Zim Integrated Shipping Services. The Motley Fool has a disclosure policy.

Why Zim Integrated Shipping Stock Is Down Big Today was originally published by The Motley Fool

Source link

About The Author

Scroll to Top