The ZIM Integrated Shipping (ZIM) stock price is firing on all cylinders this year as shipping costs rebound. Most recently, it has risen in the last eight consecutive days, moving to a high of $26.18, its highest point since August 2022. It also jumped in the last four straight weeks.
ZIM’s stock has jumped by over 322% from its lowest point in December last year, making it one of the best-performing companies in Wall Street. Its valuation has risen to over $3 billion.
Shipping costs could surge
ZIM Integrated is a leading global shipping company in business for almost 80 years. It operates 145 vessels, which mostly carry goods from Asia to other countries like Europe and in the United States.
ZIM has also become a leading player in liquified natural gas (LNG) transport, whose demand has risen following Russia’s invasion of Ukraine in 2022.
Unlike other shipping companies that own their vessels, ZIM Integrated charters most of its ships, a business model that is often flexible and asset-light.
The ZIM Integrated stock price has surged this year as shipping costs surged, leading to a second-quarter profit and a dividend return.
Drewry data shows that shopping costs rose from below $1,400 in 2023 to a high of $5,900 in July. Recently, however, they have nosedived to $3,691 because of increased shipping capacity and slow growth.
Nonetheless, there are signs that shipping costs will bounce back soon. For one, there is an upcoming strike by dockworkers in the East Coast as workers demand more pay and terminal automation. Analysts expect that this strike will cost the economy about $5 billion a day.
The challenge, however, is that companies like ZIM will see offloading delays, which could affect their revenues and profitability.
At the same time, there are risks about the Middle East, where Israel has launched a limited ground operation in Lebanon that risks war in the region.
Historically, wars in that region have an impact on shipping because of its significant in the industry. At times, companies like Maersk and ZIM use the longer Cape of Good Hope to avoid attacks by militias in the region.
ZIM’s revenue and dividend return
The most recent financial results showed that ZIM Integrated’s business did well in the last quarter, which was helped by higher shipping prices and more cargo.
Its revenue rose to $1.9 billion, a big increase from the $1.3 billon it made in the same period in 2023.
The company’s net income also jumped to $373 million as its carried volume increased to 952 K-TEUs from the previous 860 K-TEUs. Also, the average freight rate rose to $1,674 during the quarter.
As a result, the management decided to reward shareholders with a dividend, in line with its policy to return about 30% of its profits to investors.
The company also boosted its forward guidance because of the strong business performance. It expects its quarterly revenues to rise to between $2.6 billion and $3 billion while its EBIT and EBITDA will be between $1.45 billion and $1.85 billion and $1.15 billion and $1.55 billion, respectively.
Data by Yahoo Finance shows that analysts expect the upcoming revenues to come in at $2.29 billion while the annual numbers will be $7.5 billion, a 45% increase from the same period in 2023.
Low interest rates and oil prices
ZIM is also expecting to benefit from the ongoing macro events. First, central banks have started to cut interest rates to prevent a hard landing. Low rates could stimulate demand, leading to higher demand for shipping.
Second, the company will likely benefit from lower energy prices as oil prices retreat. Brent and West Texas Intermediate (WTI) have slipped from $71 to $68.25. Shipping companies do well when prices ar falling because oil is a major cost.
The challenges, however, are that the shipping industry is highly cyclical and that the ongoing price catalysts could be short-lived. For example, the workers strike will ultimately end, leading to normalised prices.
Also, there are signs that ZIM’s stock is trading higher than analysts’ estimates. It was trading at $25.6, higher than analysts’ estimates of $17.
ZIM Integrated stock analysis
ZIM chart by TradingView
The daily chart shows that the ZIM share price has done well this year, rising from $6.2 in December to $25.
Most recently, the stock has flipped the important resistance point at $22.77, invalidating the forming triple-top pattern.
The stock has remained above the 50-day and 200-day Exponential Moving Averages (EMA), meaning that bulls are in control. It formed a golden cross pattern a few months as the two lines crossed each other.
Also, the MACD indicator and the Relative Strength Index (RSI) have all pointed upwards. Therefore, the stock will continue rising as bulls target the next key resistance point at $30. The alternative scenario is where the stock retreats and retests the support at $22.77.
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