Stolt-Nielsen posted its 3Q (June-August) report on Wednesday with the main metrics very similar to what we saw three months ago and this was still at the top level with close to USD 100m bottom line. The fourth quarter is guided to be slower, although the rate recovery is supposed to be seen towards the end of 4Q24 and into 2025. After the adjustments to our model, we reduced the TP to NOK 450/sh from NOK 480/sh previously, but the share drop dictated the recommendation to stay intact as a Buy.

Very similar figures QoQ

Continuous disruptions in the Red Sea still impacts the shipping markets as longer voyages drive freight rates and margins higher, despite a lower total cargo volume. This can be seen in yet another solid report from Stolt-Nielsen, although somewhat lower than we and consensus predicted, but remaining at the record-high level with basically duplicating the solid 2Q24 results. Almost USD 100m at the bottom line for 7/8 of the last quarters (the single exception was due to one-off payments regarding Flaminia incident) is an impressive achievement. The company should make an announcement of semi-annual dividends soon and we anticipate USD 1.50/sh to be proposed.

Outlook: weaker 4Q

With the record-high TCE earnings in 3Q, the fourth quarter was guided somewhat weaker. Cargoes booked at lower spot freight rates during the seasonally slower third quarter will negatively impact the fourth quarter average TCE. However, spot freight rates are expected to recover towards the end of the fourth quarter and into 2025. The Tank Container market remains challenging with softer margins out of Europe and softer rates from Asia. Terminals and Sea Farm are expected to remain more or less stable. There is a large uncertainty regarding global events, but the conflict in Israel seems to be escalating, which would keep the Red Sea transit closed and the rates elevated at least for the nearest future. Thus, although our estimates were reduced somewhat, together with the Target Price, we still see the upside large enough for a Buy recommendation to be reiterated.
Source: Norne Research