Maersk: Expect An Exciting 2024 From An Attractive Shipping Giant

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Maersk reported a 19% increase in stock value since November 2023, which is an excellent RoR, given the state of the shipping industry. The company reported 4Q23 today.Despite challenges in the ...

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The company reported 4Q23 today.Despite challenges in the ...</p>\n\n<a href=\"https://seekingalpha.com/article/4669444-maersk-stock-q4-earnings-expect-exciting-2024-from-attractive-shipping-giant\">Source Link</a>\n\n</div>\n","source":"seekingalpha","html":"<!DOCTYPE html>\n<html>\n<head>\n<meta http-equiv=\"Content-Type\" content=\"text/html; charset=utf-8\" />\n<meta name=\"viewport\" content=\"width=device-width,initial-scale=1.0,minimum-scale=1.0,maximum-scale=1.0,user-scalable=no\"/>\n<meta name=\"format-detection\" content=\"telephone=no,email=no,address=no\" />\n<title>Maersk: Expect An Exciting 2024 From An Attractive Shipping Giant</title>\n<style type=\"text/css\">\na,abbr,acronym,address,applet,article,aside,audio,b,big,blockquote,body,canvas,caption,center,cite,code,dd,del,details,dfn,div,dl,dt,\nem,embed,fieldset,figcaption,figure,footer,form,h1,h2,h3,h4,h5,h6,header,hgroup,html,i,iframe,img,ins,kbd,label,legend,li,mark,menu,nav,\nobject,ol,output,p,pre,q,ruby,s,samp,section,small,span,strike,strong,sub,summary,sup,table,tbody,td,tfoot,th,thead,time,tr,tt,u,ul,var,video{ font:inherit;margin:0;padding:0;vertical-align:baseline;border:0 }\nbody{ font-size:16px; line-height:1.5; color:#999; background:transparent; }\n.wrapper{ overflow:hidden;word-break:break-all;padding:10px; }\nh1,h2{ font-weight:normal; line-height:1.35; margin-bottom:.6em; }\nh3,h4,h5,h6{ line-height:1.35; margin-bottom:1em; }\nh1{ font-size:24px; }\nh2{ font-size:20px; }\nh3{ font-size:18px; }\nh4{ font-size:16px; }\nh5{ font-size:14px; }\nh6{ font-size:12px; }\np,ul,ol,blockquote,dl,table{ margin:1.2em 0; }\nul,ol{ margin-left:2em; }\nul{ list-style:disc; }\nol{ list-style:decimal; }\nli,li p{ margin:10px 0;}\nimg{ max-width:100%;display:block;margin:0 auto 1em; }\nblockquote{ color:#B5B2B1; border-left:3px solid #aaa; padding:1em; }\nstrong,b{font-weight:bold;}\nem,i{font-style:italic;}\ntable{ width:100%;border-collapse:collapse;border-spacing:1px;margin:1em 0;font-size:.9em; }\nth,td{ padding:5px;text-align:left;border:1px solid #aaa; }\nth{ font-weight:bold;background:#5d5d5d; }\n.symbol-link{font-weight:bold;}\n/* header{ border-bottom:1px solid #494756; } */\n.title{ margin:0 0 8px;line-height:1.3;color:#ddd; }\n.meta {color:#5e5c6d;font-size:13px;margin:0 0 .5em; }\na{text-decoration:none; color:#2a4b87;}\n.meta .head { display: inline-block; overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\nMaersk: Expect An Exciting 2024 From An Attractive Shipping Giant\n</h2>\n\n<h4 class=\"meta\">\n\n\n2024-02-12 14:08 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://seekingalpha.com/article/4669444-maersk-stock-q4-earnings-expect-exciting-2024-from-attractive-shipping-giant><strong>seekingalpha</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>Maersk reported a 19% increase in stock value since November 2023, which is an excellent RoR, given the state of the shipping industry. The company reported 4Q23 today.Despite challenges in the ...</p>\n\n<a href=\"https://seekingalpha.com/article/4669444-maersk-stock-q4-earnings-expect-exciting-2024-from-attractive-shipping-giant\">Source Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","isBrief":false,"type":0,"news_type":1,"symbol":"AMKBF","symbol_name":"A.P. Moeller-Maersk A/S","start_time":0,"source_url":"https://seekingalpha.com/article/4669444-maersk-stock-q4-earnings-expect-exciting-2024-from-attractive-shipping-giant","article_id":"2410159848","we_media_id":null,"thumbnails":[],"rights":null,"url":"https://stock-news.laohu8.com/highlight/detail?id=2410159848","pubTimestamp":1707718093,"sourceInfo":{"source_id":"seekingalpha","name":"Seeking Alpha"},"weMediaInfo":null,"summary":"Maersk reported a 19% increase in stock value since November 2023, which is an excellent RoR, given the state of the shipping industry. The company reported 4Q23 today.Despite challenges in the shippi","collect":0,"end_time":0,"defaultTopTitle":"seekingalpha.com","property":[],"viewcount":null,"language":"en","relate_stocks":{"AMKBF":"A.P. Moeller-Maersk A/S","AMKAF":"A.P. Moeller-Maersk A/S","AMKBY":"A.P. Moeller-Maersk A/S","BK4021":"海运"},"translate_title":"马士基：期待一个有吸引力的航运巨头带来激动人心的2024年","themeId":null,"isJumpTheme":false,"ttsUrl":null,"symbols_score_info":{"AMKAF":1,"AMKBF":1,"AMKBY":1},"content_text":"Maersk reported a 19% increase in stock value since November 2023, which is an excellent RoR, given the state of the shipping industry. The company reported 4Q23 today.Despite challenges in the shipping industry, Maersk still offers significant upside for investors.The company's focus on the logistics sector and streamlined business structure contribute to its long-term growth potential, and I maintain my rating of \"Buy\" here.SERGEI GAPON/AFP via Getty Images Dear readers/followers, A.P. Møller - Mærsk A/S (OTCPK:AMKBY), (OTCPK:AMKAF), (OTCPK:AMKBF) reported its full-year results today. I have been invested in Maersk for a few months at this time, and bought more back in the massive dip back in November of 2023, in conjunction with my last article on the stock. Since then, the company has seen a very good overall recovery. We're not up as much as some of the other companies I have been reviewing for 4Q as of late, but we're up over 19% as of the time of writing this article. Valuation for the company during the past 10 months has not been in a favorable trend - then again, the same is true for many companies I cover, with 2023 being a very mixed year for many of my investments. On the one hand, I've seen incredible RoR in some investments, while others have really stagnated, requiring a timeframe of 2-4 years until normalization or profit. This does not bother me - it's the M.O. of a value-oriented investor. While it would of course be preferable to \"only\" go into companies where we see significant overall upside from the point I invested, the reality is that it most often is a far choppier process than that. In this article, we'll revisit Maersk, look at 4Q, and above all, forecast where the company seems likely to go from here. Maersk - Revisiting upside So, straight away - I still believe Maersk offers a significant upside for investors, and I am not changing my rating of \"BUY\" as of this article. This is despite the many challenges that these companies in shipping are currently facing. Over the past 10 years and more, Maersk has made significant changes to its structure and focus, overall becoming a far more ocean and logistics/terminal-focused business, as opposed to what we had previously, which was a mix of things like even banks, supermarkets oil, and gas. We're now looking at a far more streamlined business with great long-term trends. The expansion of the logistics segment is a particular highlight because it offers favorable exposure to the far less asset-intensive logistic sector while creating synergies with the customers the company already has. Ocean is by far the most significant sector - and will remain so. Over 60% of the company's top-line revenue is generated here - and the challenges in the freight rates of which I have spoken in the past few segments are unlikely to abate or go down in the near term. It'll remain a challenging, overall picture. I believe that the general trends for Maersk are favorable. The company is one of the most profitable shipping businesses out there. Much like other carriers and companies, Maersk is combining its assets and capabilities with other carriers, forming alliances to leverage its various synergies and capabilities and improve overall rationality. 2023 is the focus of this article. The company achieved its financial guidance, which is a huge plus, because it meant revenues of over $51B, with an underlying EBITDA of close to $10B. While this is nowhere close to the heights of the year/s before during peaks, it's a very solid level and an underlying EBIT margin of almost 8%. Because we're moving back to more \"normalized\" levels, if this becomes the new normal for this company, that's a very solid sort of margin to have. The company's net profit was close to $4B for the year, and this is a result of decisive cost management due to deteriorating market conditions. The company is in a good position for the next year. 2023 saw the largest share buyback and dividend in the company's history, as Maersk took advantage of the extreme conditions we saw during 2022. It's important to note the ongoing conflict in the Red Sea/Gulf of Aden. This had a small impact on 4Q but is likely to have an impact for 2024 - already accounted for by the company in the updated 2024E guidance. However, the company has vastly changed its dividend priorities for this year, ending with a dividend proposal of 515 DKK/share on a native basis. While this may sound a lot, it is to be compared to the previous one, which was more than eight times as high. The updated dividend means that the yield drops to below 5% even with the decline in the share price that we're seeing for this day. We knew, of course, that a repeat of this dividend was never going to be likely. And just as a comparison, the previous dividend levels on an annual basis for this company were closer to 150-300 DKK, so this is still a good dividend, but I have no doubt that a part of today's market action is due to that severe cut to the dividend. Maersk IR (Maersk IR) Other reasons here are found above. The company is pausing and changing its approach quite a bit from what was previously expected. Plenty of surprises in this annual report. What's become evident during this report is that the company is still in the midst of a major transformation. The return rates in terminals are among the most stable, with the ocean continuing to be a near-unforecastable chaos with freight rates and revenues continuing to show incredible volatility. It's the difficulty here, that the company's segments which have the best profitability and most forecast accuracy, are also the segments that are less than 25% of the company's sales. Maersk IR (Maersk IR) And the picture above is likely, given current trends in the Red Sea, to deteriorate somewhat in 1Q. Like many investments I make, Maersk is a long-term play with an appeal only to those with at least a 3-5 year timeframe in their investing. You need to be able to wait for the company's strategic transformation because the company could go lower. If you can't handle the volatility, you shouldn't be here. The company has very clear priorities for this year. Maersk IR (Maersk IR) And seeing that these are met and how the company works out this year is going to be a priority in order to forecast the short-term trends. As things stand now, I forecast and expect that 1Q will be a further dip from the current trends. Because of this, I expect that the share price, during the short term. It's important to not overstate the Red Sea impact either. For Maersk, this comes to roughly an impact for around 30% of the overall volumes, and the company has already forecasted and published a wide array of scenarios and outcomes that show that while it could be problematic, there are no massively detrimental results here. Here's the current 2024E guidance. Maersk IR (Maersk IR) As you can see, the company's 2024E is likely to be a trough year. The company now expects for FCF and underlying EBIT to potentially turn negative. This year is going to be a chaotic time, and we'll likely see chaos in the share price as well. Let's look at the overarching risks and upsides for this company. Maersk - Risks & Upside On the risk side, we have the short term above all. I would say that waning consumer demand, which some analysts point to, is transitory and likely to fade - though I acknowledge that failing demand from a recession could result in failing freight rates, which could de-rail this company's earnings further. This is a very cyclical business, as the last few years have clearly shown us, and no matter how many alliances or M&As the company does, as long as the mix is over 50% ocean freight, that's likely to remain this way. In addition, the company's new segments such as terminals and logistics have their own risks. These segments can be down turning in their own rights, if the actual throughput volume changes. On the upside or the positives, even if Maersk sees a downturn, the company remains one of the best plays on hyping in the world. The company's significant structural changes have resulted in efficiencies and a leaner approach to the work, which will benefit the company in the long run. When it comes to upsides and positives, I mostly point to this company's scale and long-term quality, in the case and timing of an overall reversal. Let's look at Maersk's valuation. Maersk Valuation - There's a significant upside long-term around 10,000 DKK So, first off, I'm not changing my target of 13,500 DKK for the company. Whatever risks and downsides that the company saw in 4Q and going into 2024E, are things that I calculated into the risk/reward profile for this price target. The company has a very strong moat, due to its positioning in the ocean and APM terminals, with its #1 and #2 position on the global market respectively. These businesses may be subject to what can be characterized as competition but typically are based on periods of overcapacity which tend to normalize over time. Overall, Maersk is one of the better investments I believe you can make in this sector, and as of the 15%+ drop today, it's at an attractive price that's starting to look similar to the one I wrote back in late 2023. Granted, the current forecasts call for the next few years to be very negative for not only Maersk but for the industry overall. But that is the character of this industry - analysts very rarely know what to make of things here. I say that Maersk is likely to generate at least 500-700 DKK of adjusted EPS in 2025E and 2026E, which would put a historical multiple of 20-27x at the RoR range of 17-30% annualized, or a total RoR of upwards of triple digits here. This is of course a very tall order for a company that's expected to decline from an adjusted non-recurring EPS of over 1000 DKK on an adjusted basis - but again, this is a volatile company. You need to understand and be willing to really take the long view in this one. An example of how conservative my price target actually is, if we look at Morningstar, we have a fair value estimate of nearly 18,000 DKK (Source: Morningstar). S&P Global analysts go from a low of 11,000 DKK to a high of over 26,000 DKK, with an average of over 18,500 DKK (Source: S&P Global/TIKR.com). So you can see why I'd say that this company is getting cheap here even from an analyst average. Still, it's going into a very rough period. I choose to view this company for the very long term. At my PT of 13,500 DKK, the company does in no way need to outperform over the next 3 years, only perform as expected or slightly better. But I will say here that the risk is that with the 2024E as things look now, we may see a more attractive price target for this company. Still, I added a few shares when it dipped below 11,000 today for the long term, and the dividend of over 500 DKK does mean we get close to 5% here, which for Maersk on a historical basis is quite excellent. My price target expects the company, at an average premium of 20-25x, to manage somewhere along the lines of 500-800 DKK in adjusted annual earnings, which I do not view as unlikely or unrealistic in the least. I start 2024E with the following thesis on Maersk here. Thesis  This is one of the world's most important shipping companies. At a good valuation, this company is, to me, a no-nonsense \"BUY\" with no looking back. The flow of goods dictates the state of our national economies, which makes the company a major player in macro. I view the company currently as fairly or even slightly undervalued in the face of what is an unprecedented logistic crisis. It's a \"BUY\" here to me - and I view it with a target of 13,500 DKK/share updated for late November of 2023. I recently bought more in the company.  Remember, I'm all about:  Buying undervalued - even if that undervaluation is slight and not mind-numbingly massive - companies at a discount, allowing them to normalize over time and harvesting capital gains and dividends in the meantime. If the company goes well beyond normalization and goes into overvaluation, I harvest gains and rotate my position into other undervalued stocks, repeating #1. If the company doesn't go into overvaluation but hovers within a fair value, or goes back down to undervaluation, I buy more as time allows. I reinvest proceeds from dividends, savings from work, or other cash inflows as specified in #1.  Here are my criteria and how the company fulfills them:  This company is overall qualitative. This company is fundamentally safe/conservative & well-run. This company pays a well-covered dividend. This company is currently cheap. This company has a realistic upside based on earnings growth or multiple expansion/reversion.  The company, therefore, fulfills all of my investment criteria here except it no longer really being \"cheap\" here. This article discusses one or more securities that do not trade on a major U.S. exchange. Please be aware of the risks associated with these stocks.  Editor's Note: This article discusses one or more securities that do not trade on a major U.S. exchange. 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