Shares of companies which own and operate crude oil tankers mostly rose Monday, as a JPMorgan analyst raised earnings estimates throughout the sector on an improved outlook for 2008.
Analyst Jonathan B. Chappell said he believes the tanker spot market will be stronger than previously forecast, mostly due to a higher rate of ship conversions. As more companies convert ships into other, more profitable trades, demand will increase for the remaining tankers, he predicts.
The analyst said he expects tanker stocks to ascend further though the first half of the year, especially considering the "near-record" rates in the first quarter. But Chappell said he expects the strong tanker market to slow once new tankers are built in 2009.
He upgraded General Maritime Corp. to "Overweight" from "Neutral," citing the company's potential to take advantage of a more optimistic rate outlook this year. However, he downgraded shares of Arlington Tankers Ltd. to "Underweight" from "Neutral" and Tsakos Energy Navigation to "Neutral" from "Overweight," suggesting those companies have little room for growth, and few drivers expected in the near future.
Chappell rates Overseas Shipholding Group, Teekay Corp. and Ship Finance International Ltd. as his top picks in the sector, noting strong management and the ability to grow earnings through fleet acquisitions.
In afternoon trading, General Maritime Corp. jumped $1.17, or 4.6 percent, to $26.68.
Arlington Tankers, Ltd. slipped 47 cents, or 2.3 percent, to $20.40, while Tsakos Energy Navigation lost $1.78, or 5 percent, to $33.52. Overseas Shipholding Group fell 11 cents to $63.93, and Teekay lost 11 cents to $44.99.
Ship Finance International added 27 cents to $26.86.
Elsewhere in the sector, Double Hull Tankers Inc. rose 49 cents, or 4.2 percent, to $12.24, and Knightsbridge Tankers Ltd. surged 87 cents, or 3.5 percent, to $26.02. Omega Navigation Enterprises Inc. gained 34 cents, or 2.1 percent, to $16.42.
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