Meaning there's probably a bucko or two to be made here.
For some background see also Monday's ICYMI—Shipping: "Tanker Rates Crash as OPEC+ Cuts Near. Tanker Owners Reman Bullish".
From FreightWaves, May 6:
On Wednesday, U.S.-listed tanker owners reported record-high results, executives confirmed strengthening rates on conference calls, the broader stock market was relatively stable (at least until the last hour), the price of crude oil declined … and yet, tanker stocks fell sharply in heavy trading.
It was “the craziest price action I’ve seen in my nine years covering the space,” Jefferies shipping analyst Randy Giveans told FreightWaves.
There have been plenty of bad days for tanker stocks, including the day before. Sometimes, you could blame bad results. Sometimes, you could blame the coronavirus — negative macro momentum was just too strong. And sometimes, you could blame rising oil prices, which make floating storage less attractive, a negative for tanker demand.
But whodunit this time?
Some investors head for exit
Jon Chappell, the shipping analyst at investment bank Evercore ISI, told FreightWaves, “I’m afraid sentiment has shifted. Expectations were too high, and worse, there is no differentiation during a sell-off.
“We just downgraded DHT [NYSE: DHT] on Sunday night and even I don’t think the stock should be down 6% on a first-quarter EPS [earnings per share] beat and $110,000-per-day, second-quarter-to-date VLCC [very large crude carrier] rates.”
The analyst made those comments at around midday. DHT closed down 8% in almost double average trading volume.
“And Scorpio Tankers [NYSE: STNG] is even more insane,” Chappell continued. Before market open on Wednesday, Scorpio Tankers reported net income of $46.6 million for the first quarter of 2020, triple its net income in the same period last year. Earnings of 85 cents per share demolished the consensus forecast of 49 cents per share.
“That stock was trading below 50% of NAV, they crushed the first quarter, second-quarter-to-date rates were very good and indications are that current rates are even higher, the call went really well, and the stock gets puked?” Chappell exclaimed.
During the conference call with analysts, Scorpio Tankers head trader Lars Dencker Nielsen revealed that one of the company’s LR2 product tankers (vessels with a capacity of 80,000-119,999 deadweight tons) was just booked at an eye-popping rate $178,000 per day for 40 days.
And yet, Scorpio Tankers’ stock closed the trading day down 10% in almost triple average volume.....MUCH MORE
“That one is mind-blowing to me, but it shows that investors don’t try to find safe havens when they’re exiting a hot sector,” said Chappell.
“This is exactly what we were afraid of and it’s the reason we shifted our views and downgraded three stocks [DHT, Frontline (NYSE: FRO) and Nordic American Tankers (NYSE: NAT)] ahead of what we expected to be a great earnings season. Right now, again, sentiment and macro are more important than EPS, dividends and micro. This was a very painful lesson for us in 2016 and at least we got ahead of it this time.”....
