ZIM Integrated Shipping Services Limited (ZIM – Free Report) stock is cheap, as suggested by its Value Score of A. ZIM is currently trading at a forward price/sales of 0.22X, an 84.9% discount when compared with the Zacks Transportation-Shipping industry’s average of 1.46X.
Moreover, ZIM is cheaper than other shipping stocks like Seanergy Maritime Holdings (SHIP – Free Report) and Star Bulk Carriers (SBLK – Free Report) .
ZIM’s P/S F12M Vs. Industry, SHIP & SBLK
Image Source: Zacks Investment Research
With the stock trading at a discount now, we delve into the company’s growth drivers and challenges to evaluate if investors should park their cash in ZIM at this time.
ZIM’s Generous Dividend Payouts Boost Optimism
ZIM’s shareholder-friendly approach throws light on its financial prosperity. The shipping company’s high dividend yield is a huge positive for income-seeking investors. This highlights confidence in its cash flow and prospects.
In the December quarter, ZIM’s board declared a regular dividend of approximately $382 million or $3.17 per ordinary share. Together with the dividends shelled out in 2024, the payout represents approximately 45% of the full year’s net income.
ZIM’s Business Model Looks Impressive
The shipping company has an asset-light model, which means that the focus is more on leasing rather than owning vessels. This allows it to adjust capacity rapidly in response to market changes. This practice helps it boost profits during high demand.
ZIM’s focus on niche markets and high-margin trade routes helps it avoid crowded, low-margin segments, thereby maintaining strong pricing power. This, too, aids profitability. The shipping company’s operational efficiency is being aided by investments in digitalization and innovative technologies.
ZIM’s Earnings History Bodes Well
Driven by factors like high revenues and carried volumes, the shipping stock outpaced the Zacks Consensus Estimate for earnings in three of the last four quarters (missing the mark in the other one), with the average beat being 19.3%.
Stay up-to-date with all quarterly releases: See Zacks Earnings Calendar.
ZIM Integrated Shipping Services Price and EPS Surprise
ZIM Integrated Shipping Services Ltd. price-eps-surprise | ZIM Integrated Shipping Services Ltd. Quote
Tariff Tensions Result in ZIM’s Bearish Guidance
The current administration is focused on protectionism, which restricts international trade to benefit domestic industries. Tariff tensions are escalating, with the U.S. federal government imposing new tariffs. These have impacted the United States’ biggest trading partners — Canada, Mexico and China. With retaliatory tariffs against the United States, trade tensions are escalating. The shipping industry is responsible for transporting the majority of the goods involved in world trade. The slowdown in trade may disrupt trade routes, bringing down goods transportation and in turn hurting the industry players. This trade war is expected to result in increased volatility and uncertainty going forward.
Declining freight rates could put pressure on ZIM’s future earnings. On the fourth quarter conference call, management expressed concerns about declining freight rates. Taking into account the high degree of uncertainty related to global trade, geopolitical issues and the timing of the Red Sea opening, ZIM’s management issued dull 2025 projections for key metrics. The shipping company expects adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) to be $1.6-$2.2 billion for 2025. Adjusted EBIT (earnings before interest and taxes) for 2025 is expected to be in the range of $350-$950 million. Adjusted EBITDA in 2024 was $3.69 billion, reflecting a year-over-year increase of 252%. Adjusted EBIT in 2024 was $2.55 billion compared to an adjusted EBIT loss of $422 million in 2023.
Disappointing Performance of ZIM Stock
Due to the tariff-related uncertainty, ZIM stock has declined in double digits over the past three months, underperforming the industry and fellow shipping stocks like Seanergy Maritime Holdings and Star Bulk Carriers.
Three-Month Price Comparison
Image Source: Zacks Investment Research
ZIM has also underperformed its industry, Seanergy Maritime Holdings and Star Bulk Carriers, year to date. So far this year, ZIM shares have declined 27.9%, while the industry and Seanergy Maritime Holdings have declined 8.1% and 7%, respectively. Shares of Star Bulk Carriers have gained 5.2% year to date.
What Do Earnings Estimates Say for ZIM?
In the past 60 days, the Zacks Consensus Estimate for ZIM’s first-quarter and second-quarter 2025 earnings and for full-year 2025 earnings have moved south.
Image Source: Zacks Investment Research
Not an Opportune Time to Buy ZIM Stock
There is no doubt that the stock is attractively valued. The company’s shareholder-friendly initiatives also add to its appeal. However, the bearish outlook given by ZIM management, mainly due to the tariff-induced economic uncertainty, cannot be ignored. Declining earnings estimates also do not help matters.
Given the current turbulence, it is not at all advisable to buy the dip in this Zacks Rank #3 (Hold) stock. Investors should monitor the company’s developments closely for an appropriate entry point. For those who already own the stock, it will be prudent to stay invested.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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