From the perspective of profit and stock performance, the world's largest container shipping company, Maersk , experienced the most brilliant year in its 118-year history and the worst year in more than 10 years.
Although this difference is largely due to investors' expectations of future returns, this contrast is obvious for the transportation giant. Maersk is making so much money now, and its net profit is equivalent to about 9% of its home country, Denmark, GDP.
Zhitong Finance APP noticed that Maersk's profit soared due to shortage of transportation capacity, coupled with supply chain bottlenecks and the lockdown of the new crown epidemic, resulting in a surge in freight costs. According to the Shanghai Shipping Exchange container index (an indicator for measuring China's outbound freight rates), freight rates rose more than 7 times from the peak from October 2019 to January 2022. After that, as ports open and congestion eased, the freight price fell by about 60%.
So the company's revenue may be like a roller coaster ride. Bloomberg's latest survey shows that Maersk's net profit this year will almost double its already high level in 2021, reaching a record $29.3 billion. This will make it the third most profitable stock in the Stoke Europe 600 index.
But next year, with analysts expecting Maersk's net profit to fall by more than 70% to $7.97 billion.
is the core of its stock valuation dilemma around its stock valuation is the sustainability of Maersk's profits and what value is its registered contract (about 70% of long-term business) in the event of a sharp decline in spot exchange rate .
Maersk stock price is heading towards its worst year since the 2008 financial crisis. The stock has fallen 38% so far, nearly twice the average of the Stock European 600 index.
Kepler Cheuvreux shipping stock analyst Anders Redigh Karlsen said the spot exchange rate fluctuations have led to "uncertainty in earnings forecasts", and it is still debated how much the impact of this exchange rate will have on Maersk's future contract. "I think these contracts have some value," said Karlsen. "There may be some people trying to renegotiate. Some concessions may be made based on case handling, such as extending the contract term." The others are even more pessimistic. Barclays analyst Alexia Doagani believes that spot exchange rate trends are "the closest indicator to future profit prospects." His rating on Maersk is one of the few "sell" ratings.
Shipping outlook is bleak, and economic recession is approaching, and rising consumer prices are expected to lead to a decline in global demand for Maersk shipments. As global supply line congestion eases, capacity will also rise, meaning more ships will compete for less cargo.
Doagani believes that if the upcoming recession is similar to the global financial crisis in 2008, corporate profits will face "significant" risks. Although Maersk has strategically reduced the risks brought by shipping price fluctuations in through large investments in land-based transportation business in the past few years, she expressed doubts about whether this move can drive higher performance due to the commoditization characteristics of the land-based transportation business.
data shows that analysts are increasingly pessimistic about the container shipping company, cutting its 12-month target price on average by 12% over the past two months, although most analysts still recommend "buy" the company's shares.
