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Tsakos: Navigating the Shipping Sector

04/04/2018 5:00 am EST

Focus: TRANSPORTATION

John Buckingham

Editor, The Prudent Speculator

Tsakos Energy Navigation (TNP) bounced a bit after the marine shipper reported Q4 EPS that was well ahead of consensus analyst estimates, notes value investing expert and money manager John Buckingham, editor of The Prudent Speculator.

Tsakos posted adjusted earnings of $0.03 per share, far better than analyst forecasts calling for a $0.05 loss. Revenue of $106.6 million came in 2% below investor expectations, but TNP’s fleet operated at 98% utilization in Q4.

Said fleet, on a pro-forma basis, consists of 65 double-hull vessels, including 47 crude tankers, 13 product tankers and two LNG carriers. 50 vessels are in secured revenue contracts, with an average charter time of 2.6 years and minimum secured revenue of $1.3 billion.

Despite a difficult tanker market due to a temporary surplus vessel capacity and production cuts by leading suppliers, which resulted in market spot rates in several sectors falling to exceptionally low levels, TNP’s vessels achieved an average daily net revenue per vessel of $18,343, a comparatively high rate compared to the spot market.


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TNP’s balance sheet also remained solid with some $203 million in cash and net debt to capital of 51%.

CEO Nikolas P. Tsakos commented, “The markets are gradually positioning for an upturn and TNP is well placed to reap those rewards as they will occur.”

Though the stock has been a disappointment over the years, despite relatively sizable dividend payouts made every quarter, we remain fans of TNP as the shares change hands at 0.6 times estimated sales and 1.7 times estimated cash flow, both ratios well below the historical norms.

We also like how management has navigated the turbulent industry waters. It is also worth noting that Wall Street sees TNP generating adjusted EPS in 2019 of $0.61, after a slightly profitable 2018, though estimates are all over the map, despite 12 different analysts providing projections. And for 2020, the mean of the three EPS estimates presently offered is $1.06, but the low estimate is a loss of $0.39 and the high is a profit of $1.94.

Needless to say, there is hardly consensus in the forecasts, which we think creates plenty of upside potential for the stock when shipping rates improve.

And, with a young fleet, a more subdued industry-wide order book going forward and relatively consistent growth in global oil demand likely for the foreseeable future, we continue to think this micro-cap name fits in well with the much more well-known integrated oil companies and oil-service names that account for the lion’s share of our energy sector exposure. Our target price for TNP remains $7.

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