A Key Year for Teekay Tankers

With 2012 just beginning, now's a smart time to gauge how the stocks you're interested in are likely to do this year and beyond. By knowing what stock analysts and fellow investors expect from a stock, you'll be smarter about whether you should buy it for your portfolio -- or sell it if you already own it.

Today, let's take a look at Teekay Tankers (NYSE: TNK  ) . As I discussed last month, a horrible environment for tanker shipping in 2011 took Teekay Tankers' shares to the doghouse. But will 2012 prove to be the year that the industry gets out of its shipping glut and starts turning around? Below, I'll take a closer look at what people expect from Teekay Tankers and its rivals.

Forecasts on Teekay Tankers

Median Target Stock Price $6
2011 EPS Estimate                           $0.21
2012 EPS Estimate $0.11
Expected Annual Earnings Growth, Next 5 Years 6.5%
Forward P/E 38.6
CAPS Rating ****

Source: Yahoo! Finance.

Can Teekay Tankers bounce back in 2012?
Analysts have mixed thoughts about Teekay Tankers. On one hand, they expect roughly 40% share-price appreciation based on their target price. But that's not very consistent with having earnings cut in half. And with total revenue expected to contract again in 2012 by about 8%, it's clear that few think the hard times are over in the industry.

At this point, the future of the industry may depend on a game of musical chairs, as the last company standing may end up winning a big consolidation prize in the end. Frontline (NYSE: FRO  ) seems to be one of the weakest players in the industry, as it reported a big loss in its third quarter and publicly stated its need to get additional financing to keep operating. That inflicted collateral damage on Ship Finance International (NYSE: SFL  ) , which does a lot of business with Frontline. If a series of business failures leads to ships getting taken out of commission or being put up for sales cheaply to the survivors, it could benefit Teekay and competitor Nordic American Tankers (NYSE: NAT  ) , which are arguably in at least somewhat better positions financially. Nordic has a debt-to-equity ratio of just 19%, and Teekay can cut its huge dividend to conserve capital if it needs to.

With all the uncertainty in the global economy, it's very hard to predict how the oil shipping industry and Teekay Tankers in particular will do. But I believe that after a vicious shakeout in the industry, Teekay actually stands a pretty good chance of emerging stronger than it entered 2012.

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Click here to add Teekay Tankers to My Watchlist, which can find all of our Foolish analysis on it and all your other stocks.

Fool contributor Dan Caplinger doesn't own shares of the companies mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Fool has a disclosure policy.


Read/Post Comments (2) | Recommend This Article (3)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On January 16, 2012, at 3:10 PM, imkul2003 wrote:

    Apparently, you are not aware that FRO recently got rid of all its debt (basically) and cut its fleetwide breakeven rate substantially! Your description of Frontline as "one of the weakest players in the industry" is therefore risible.

  • Report this Comment On January 17, 2012, at 7:22 PM, sandybayou wrote:

    Where have you been for the last month. Posting outdated stuff about Frontline. You have lost all credibility. Your article should be pulled for stating false misleading information!!

    You should look at this link.

    http://seekingalpha.com/article/313291-frontline-restructuri...

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