What happened
Shares of oil shipping company Teekay Tankers (TNK -0.16%) jumped as much as 14.9% in trading on Thursday after the company reported first-quarter 2023 financial results. Shares closed the day up 12.7%.
So what
Total revenue more than doubled to $394.7 million and the company swung from a net loss a year ago to net income of $169.4 million, or $4.97 per share. Net debt was also reduced by nearly 50% to $181.9 million.
Results were slightly better than the fourth quarter, so no major surprises. But management did announce a $100 million share repurchase plan and a $1-per-share special dividend. That's a big buyback for a company that has a market cap of $1.5 billion even after today's pop.
Now what
It's understandable that the stock popped given the buyback and dividend news. Investors have long been wary of shipping stocks because companies have typically not been shareholder friendly and the cycles of the tanker market tend to lead to oversupply after periods of high profits. It's not clear if that cycle will continue in the future.
What's encouraging to me is that energy companies have cut back on investment in new capacity across the board, choosing instead to become cash-flow businesses. That may mean that revenue will be stagnant, but it means profits will go up. If that theory plays out long-term, Teekay and other energy companies will be big beneficiaries, but be aware that oversupply could turn the profits the other way very quickly.
