ZIM Integrated: Q3 EPS Are Set Around $10 EPS, Q4 Could Be Similar

Core Viewpoint - ZIM Integrated Shipping Services Ltd. is expected to generate strong earnings, with Q3 EPS projected at $10, despite recent stock price declines due to market sentiment and short positions [3][20]. Q2 Results and H2 Expectations - Q2 results showed an EPS of $3.08, exceeding analysts' expectations by $1.16, driven by rising rates and lower costs per TEU [4]. - Full-year guidance has been raised significantly, with expectations for further revisions in Q3 [4][20]. - Despite a 20% stock price increase post-results, the stock has since declined to new lows, attributed to concerns over declining rates and increased short positions [4][20]. Rate Projections and Market Dynamics - The CCFI (China Containerized Freight Index) showed a 47% QoQ increase and a 141% YoY increase in Q3 2024, indicating strong market conditions [6]. - ZIM's Q2 rates improved by 15% compared to Q1, outperforming the CCFI's 12% improvement [7]. - Q3 rates are expected to be between $2,500/TEU, which would significantly boost EPS [9]. Dividend and Cash Position - ZIM is projected to finish the year with over $22.5 in cash per share and plans to distribute around $8 in dividends for 2024 [5][15]. - The company is expected to maintain a strong cash position even after dividend payments, with estimates suggesting cash could exceed $30 per share [13][15]. Stock Valuation - Current market valuation is considered excessively low, with a fair value estimated around $25 per share, despite potential for higher valuations based on cash flow and earnings [5][15]. - The large order book and rate uncertainty are factors contributing to a conservative valuation approach [15][21]. Potential Disruptions - The ILA union is threatening a strike, which could significantly impact maritime supply chains, representing 16.2% of global TEU-miles [3]. - If the strike occurs, it could lead to increased rates and improved market sentiment [21]. Long-term Outlook - ZIM is expected to reduce its breakeven costs significantly by redelivering older vessels, positioning itself competitively in the industry [16][21]. - The company is anticipated to generate better results than peers in the long run, despite challenges from new supply depressing rates [16].