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Container shipping is about to report blockbuster Q1 earnings

Listed container-ship owners and operators won’t report final Q1 results for another month, but three early disclosures give a taste of what’s to come. The signals are flashing bright green.

Taiwan-listed Evergreen just posted record-breaking monthly operating revenues for March, while Oslo, Norway-listed MPC Containers revised its outlook upward and Hong Kong-listed COSCO Shipping announced preliminary results that shattered analyst expectations.

The first quarter is shaping up to be much better than Q4 2020

The first quarter is shaping up to be much better than Q4 2020. For most container-shipping companies, it could be the best quarter in their history — at least, until the second quarter.

Evergreen’s Q1 revenues jump

As the world fixated on the plight of the Ever Given in the Suez Canal, the liner company that operates the ship, Evergreen Marine Corp, was wrapping up the best quarter, revenue-wise, in its history.

Evergreen reported 32.17 billion New Taiwan dollars (NT$) in operating revenue for the month of March, up 135% year-on-year and up 40% versus Q4 2020. Revenues for the first quarter totaled NT$90.24 billion, the equivalent of $3.17 billion and just over double Q1 2020 revenues.

Fearnleys Securities noted Monday that Evergreen is “a close peer to ZIM [NYSE: ZIM] due to high trans-Pacific exposure.” Pointing to Evergreen’s Q1 revenue jump, it said “similar arithmetic” should apply to ZIM.

Consequently, Fearnleys believes ZIM’s Q1 2021 revenues will be $1.8 billion-$2 billion, with minimum earnings before interest, taxes, depreciation and amortization (EBITDA) of $800 million. “In short, ZIM generates 50%-plus of FY 2021 guidance in one quarter.” Furthermore, Fearnleys believes ZIM’s Q2 results “will match if not exceed Q1.”

COSCO blows away estimates

The MPC and Evergreen disclosures followed an earnings “blowout” announcement by China’s COSCO last week.

In a securities disclosure on the Hong Kong Stock Exchange, it pre-announced net income for Q1 2021 of 15.45 billion yuan (RMB), the equivalent of $2.36 billion. That’s 53 times the profit COSCO reported in Q1 2020

Jefferies analyst Andrew Lee commented that COSCO’s Q1 estimate “already exceeds both our and consensus 2021 full-year estimate of RMB10.8 billion and RMB13.1 billion.”

To put the enormity of the number in context, COSCO’s Q1 profit estimate is 56% higher than what the company earned in the entire year of 2020

Commenting on the COSCO revelation, Jefferies analyst David Kerstens said, “This bodes well for the Q1 2021 outlook for the European container liners Maersk and Hapag-Lloyd.”

Kerstens added, “The normalization of the container market is taking longer than expected, due to bottlenecks and capacity constraints, exacerbated by the recent blockage of the Suez Canal, while container demand is supported by the greatest restocking cycle on record in the U.S.”
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