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3 Shipping Stocks to Sail Smooth on Likely Q1 Earnings Beat


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The first-quarter earnings season is well into its latter half with more than 81% of the S&P 500 members having unveiled their quarterly results already. 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 23.2% and 8.7%, on a year-over-year basis. Both figures compare favorably with the readings in Q4, when bottom line expanded 13.4% and revenues grew 8.1%. The bullish Q1 projection can be attributed to factors like the corporate tax overhaul apart from an improving economy and a much-improved job market.

Given the prevalent healthy scenario, it is quite natural that the sectors should deliver an impressive performance. In fact, per the above report, all the 16 Zacks sectors are projected to end Q1 with year-over-year earnings growth. Moreover, 13 are anticipated to display double-digit earnings growth.

One of the13 sectors is  Transportation . Majority of the sector participants, including all S&P 500 members, have already reported financial numbers. Despite high fuel costs, the sector has seen key players like Expeditors International of Washington, Inc. EXPD , SkyWest, Inc. SKYW and Norfolk Southern Corporation NSC reporting better-than-expected earnings per share and revenues.

Outperformers Still Left in the Bank

With most transportation players having already unveiled their Q1 numbers, only a handful reports from the space are still to come. Most of those companies belong to the shipping space. In fact, the scenario surrounding shippers is quite positive in view of the surge in the Baltic Dry Index (a gauge of the shipping costs of raw materials such as iron ore, coal and grain) recently.

How to Pick the Winners?

Given the bullish sentiment surrounding shipping stocks, it would not be a bad idea to add companies from the space, which have 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. While it is impossible to be sure about such outperformers, our proprietary methodology --  Earnings ESP  -- makes it relatively simple. 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 with their next earnings announcement. It shows the percentage difference between the Most Accurate estimate and the Zacks Consensus Estimate.

You could further narrow down the list of choices by looking at stocks that have a favorable Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold). You can see  the complete list of today's Zacks #1 Rank stocks here .

Our research shows that for stocks with this combination, the chance of a positive earnings surprise is as high as 70%.

Our Choices

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

Golden Ocean Group Limited GOGL , based in Hamilton, Bermuda,focuses on the transportation of dry bulk cargoes. It operates primarily in the Capesize and Panamax market.

It has an Earnings ESP of +33.33%, as the Most Accurate estimate of 4 cents per share is above the Zacks Consensus Estimate by a penny. The company carries a Zacks Rank #3, which when combined with a positive ESP, makes us confident of an earnings beat. Golden Ocean Group will unveil its results on May 31.

Star Bulk Carriers Corp. SBLK is a Greece-based leading global shipping company in the dry bulk sector. The company has an Earnings ESP of +1.08% and Zacks Rank #3. Star Bulk is expected to reveal its results on May 23.

Our third choice is Navios Maritime Acquisition Corporation NNA . This Monaco-based company is a provider of marine transportation services. The company has an Earnings ESP of +5.56% and Zacks Rank #3.  Navios Maritime is scheduled to reveal its results on May 10.

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SkyWest, Inc. (SKYW): Free Stock Analysis Report

Norfolk Southern Corporation (NSC): Free Stock Analysis Report

Star Bulk Carriers Corp. (SBLK): Free Stock Analysis Report

Golden Ocean Group Limited (GOGL): Free Stock Analysis Report

Navios Maritime Acquisition Corporation (NNA): Free Stock Analysis Report

Expeditors International of Washington, Inc. (EXPD): Free Stock Analysis Report

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Zacks Investment Research

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.



This article appears in: Investing , Earnings
Referenced Symbols: SKYW , NSC , SBLK , GOGL , NNA



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