Transportation

Credit Suisse Warms Up to Tankers

Chris Lange

Oil tanker
Source: Thinkstock
Credit Suisse is warming up to tankers. The brokerage firm reiterated its Outperform ratings on Euronav NV (NYSE: EURN), Scorpio Tankers Inc. (NYSE: STNG), and Tsakos Energy Navigation Limited (NYSE: TNP).

Essentially, Credit Suisse is increasing its 2015 earnings per share (EPS) estimates for Euronav to $1.75, up from $1.55, which is 16% above consensus. At the same time it is also increasing the 2015 EPS estimate on Scorpio to $1.05, an increase from $0.94, and boosting Tsakos to $1.35, from $1.13.

Credit Suisse detailed in its report:

With second quarter in the books and the third quarter fixing cycle already underway the summer downturn is looking to be much more muted than expected. Tanker rates continue to surprise to the upside with VLCC rates currently averaging over $70k/d. Not to be left out product tanker rates (MRs) continue to be in the mid-high $20k/d range. While we expect some summer softness, the table already looks set for a strong winter market (think Iran).

The brokerage firm’s energy team held a conference call with Dr. Feshraki of FGE (energy consultants), and here were a few takeaways:

  • 500,000 barrels a day of new volumes could be placed with buyers by end of 2015
  • Iran is already in discussions with customers
  • Another 700,000 barrels a day could be delivered 6 months after sanctions are removed
  • Iran does not want a price war (Credit Suisse thinks it can’t win)
  • Approximately 37 million barrels in storage (products and condensate)

The strong spot market has started to filter into the period market with 1 and 3 year rates up roughly 20% to 25% year to date. The period market is up 5% to 10% since May. However, despite the strength in charter rates, asset prices have trended sideways in the current market.

Overall Credit Suisse expects tanker values to rise.

Shares of Euronav were down 0.5% at $15.23 on Wednesday afternoon. The stock has a consensus analyst price target of $17.40 and a 52-week trading range of $10.34 to $15.50.

Scorpio shares were up 1.5% at $10.30 on a 52-week trading range of $6.48 to $10.51. The stock has a consensus analyst price target of $11.70.

Shares of Tsakos were down 0.4% at $10.28. The stock has a consensus analyst price target of $12.51 and a 52-week trading range of $4.75 to $10.50.