Analyst Ken Hoexter of Bank of America Securities reiterated a Hold rating on Scorpio Tankers (STNG – Research Report), with a price target of $72.00.
Ken Hoexter has given his Hold rating due to a combination of factors impacting Scorpio Tankers’ market positioning and financial prospects. The sharp increase in Long-Range 2 (LR-2) tanker rates to $70,000/day, spurred by disruptions in the Red Sea and the resulting diversion of freight away from the Suez Canal, suggests a tight supply-demand dynamic in the product tanker market. Despite the positive outlook for rates, which supports Hoexter’s thesis for the year ahead, there remains a cautious view on long-term contract opportunities, as charterers show uncertainty towards demand projections into 2027. This is compounded by a rising product tanker orderbook, which could dampen multi-year contract appetites due to expectations of new vessel deliveries in the coming years.
In the financial analysis, Scorpio Tankers’ strategy to reduce net debt to below its market scrap value before increasing dividends is acknowledged. With the company’s net debt at $1.3 billion at the end of the third quarter of 2023 and the potential for accelerated returns due to higher charter rates, there is a possibility that the firm could reach its net debt target ahead of schedule. However, Hoexter’s report also notes the limitations in securing long-term contracts in the current elevated rate environment. While the price objective for Scorpio Tankers’ stock has been increased to $72, the Hold rating is maintained due to the concerns about the rising orderbook and the impact on long-term contracting, despite the modest increase in EBITDA estimates for 2024.
According to TipRanks, Hoexter is a 4-star analyst with an average return of 3.7% and a 52.61% success rate. Hoexter covers the Industrials sector, focusing on stocks such as Saia, Westinghouse Air Brake Technologies, and Norfolk Southern.
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Scorpio Tankers (STNG) Company Description:
Scorpio Tankers, Inc. engages in the provision of marine transportation of petroleum products. It operates through the following segments: Handymax, MR, LR1/Panamax, and LR2/Aframax. The company was founded by Emanuele A. Lauro on July 1, 2009 and is headquartered in Monaco.
Read More on STNG:
- Scorpio Tankers price target raised to $70 from $68 at BofA
- Scorpio Tankers Inc. Announces an Agreement to Sell an MR Product Tanker and the Exercise of Purchase Options on Five Ships
- Scorpio Tankers to sell an MR Tanker and excercise purchase options on 5 tankers
- Scorpio Tankers price target raised to $74 from $70 at Deutsche Bank
- Scorpio Tankers call volume above normal and directionally bullish
