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Why Costamare Stock Just Popped 13.5%

By Rich Smith – Jun 23, 2020 at 2:57PM

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Costamare has successfully pushed back most debt obligations into 2024.

What happened

Shares of containership operator Costamare (NYSE: CMRE) are surging higher in Tuesday afternoon trading, up 13.5% as of 2:30 p.m. EDT. The stock appears to be benefiting from a press release this morning, in which Costamare boasted that is now more or less safe from any bankruptcy concerns through 2024.

So what

Was Costamare ever really in any danger of bankruptcy? Probably not. But seeing as the company is heading into a global recession with some $1.6 billion in debt and less than $200 million in cash, investors may still have been nervous.

Pencil erasing the word debt

Image source: Getty Images.

To allay any concerns about its solvency, earlier this year, Costamare embarked upon a plan to refinance about $240 million worth of debt, securing new loans for about $435 million in the process. That plan wrapped up with "the execution of two new loan agreements for an aggregate amount of $140 million" today and, as a result, CFO Gregory Zikos says Costamare now has "no meaningful debt maturities until 2024."

Now what

In the meantime, Costamare seems to be sailing along just fine. The company has remained solidly profitable through the first quarter, which included coronavirus impacts, and trailing-12-month profits are a respectable $133 million. Free cash flow at the containership operator looks even better: $189 million, comfortably ahead of reported net income. And analysts who follow the company see Costamare growing its profits despite the pandemic, both this year and next year, too.

At a share price of less than six times reported earnings, with debt no longer an immediate concern, Costamare stock looks like a safe port in the coronavirus storm.

Rich Smith has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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