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Why ZIM Integrated Shipping Services Stock Dropped Today

By Rich Smith - Mar 22, 2021 at 1:05PM

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Earnings missed estimates -- but that doesn't mean it was a bad quarter.

What happened

Shares of ZIM Integrated Shipping Services (NYSE: ZIM), an Israeli oceangoing container-shipper, tumbled 5.6% through 11:40 a.m. EDT Monday after "missing earnings" in the company's fourth-quarter 2020 financial report this morning.

Expected to earn $3.71 per share on sales of $1.3 billion for the quarter, ZIM said it only earned $3.65 per share, despite sales exceeding expectations at $1.4 billion.  

Container ship in port getting worked on by cranes

Image source: Getty Images.

So what

ZIM may have "missed estimates" for Q4, but it still ended up earning 305 times more profit in Q4 2020 than it had in Q4 2019, when its profits totaled just $1.2 million. The company earned $5.18 per share for the full year, versus losing money for all of 2019.

Revenues increased 64% year over year for the quarter, and 21% for the year. Total revenues for 2020 were $4 billion.

Now what

Now here's the most important bit of news for investors in the shipping sector -- the news you want to know whether you own ZIM or one of its rivals, such as Atlas Corporation, Costamare, or Danaos Corporation.

ZIM may have grown its sales 21% year over year, but the actual amount of cargo it carried in 2020 was only 1% greater than cargo shipped in 2019 -- "2,841 thousand TEUs" (Twenty-foot container Equivalent Units). So the increases in profits at ZIM, and the increase in profits at Atlas, Costamare, and Danaos that you can expect, were/are almost entirely due to improved shipping rates -- the prices ZIM got for performing its services. Average freight rates per TEU in 2020 jumped 22% compared to 2019.  

The higher those rates go, and the longer they stay high, the better things will be for ZIM and its peers.

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