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Why Teekay Tankers Stock Jumped Today

By Rich Smith - Feb 22, 2018 at 3:43PM

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Losses weren't as great as feared.

What happened

Shares of oceangoing oil transporter Teekay Tankers Ltd. (TNK -2.06%) jumped as much as 12% in early Thursday trading after the company reported Q4 earnings, and they remain up 10% as of 3:00 p.m. EST.

Teekay reported a $0.01-per-share loss for the quarter, or a loss $0.03 per share when adjusting for one-time items. Whichever number you use, though, Teekay beat analyst predictions for a $0.06-per-share loss pretty soundly. Quarterly revenue of $105.2 million likewise topped estimates for sales of $87.9 million.

The front deck of an oil tanker

Image source: Getty Images.

So what

Teekay beat expectations. But how did it do objectively? Well, not so well.

Sales came in 15% below what Teekay had booked in the year-ago quarter, and the company's $0.01-per-share loss reversed the $0.05 per share it had earned in Q4 2016.

For the year as a whole, the story was similar. Total sales for fiscal 2017 came to $431.2 million, down 22% from last year's $550.5 million. Teekay lost a total of $0.31 per share last year, versus profits of $0.40 per share in 2016.

Now what

Teekay CEO Kevin Mackay noted in his earnings report that "crude tanker spot rates increased in the fourth quarter of 2017," helping the company to top analyst estimates. However, rates "did not experience the typical winter seasonal spike primarily due to lower OPEC oil production, supply outages and a lack of winter weather delays," which decreased demand, hurting tanker companies' pricing power.

As for what comes next, Mackay warns that "we have seen further weakness in the crude tanker market" since Q4 ended, "driven by many of these same factors, combined with higher bunker fuel costs as crude oil has recently hit highs of $70 per barrel." That could hurt profits this year.

On the other hand, Mackay also predicted that "elevated levels of tanker scrapping will positively contribute to a significant slowdown in tanker fleet growth." His hope is that this will squeeze tanker capacity, and that this, "when coupled with stronger oil market fundamentals, should lead to a recovery in tanker rates in the latter part of 2018 and into 2019" -- and fatter profits for Teekay going forward.

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