Will Nordic American Tankers Stay Afloat in 2012?
With 2012 just beginning, now's a smart time to gauge how the stocks you're interested in are likely to do this year and beyond. By knowing what stock analysts and fellow investors expect from a stock, you'll be smarter about whether you should buy it for your portfolio -- or sell it if you already own it.
Today, let's take a look at Nordic American Tankers (NYS: NAT) . As I discussed last month, the oil shipper has built an impressive fleet of 20 tankers, but weak demand combined with a glut of tanker capacity across the industry helped cut the company's stock in half during 2011. With the economy looking like it's pointing upward, could it be time for a rebound, or will the oil tanker industry keep taking on water? Below, I'll take a closer look at what people expect from Nordic American Tankers and its rivals.
Forecasts on Nordic American Tankers
|Median Target Stock Price||$14|
|2011 EPS Estimate||($1.01)|
|2012 EPS Estimate||($0.83)|
|Expected Annual Earnings Growth, Next 5 Years||0%|
|CAPS Rating (out of 5)||****|
Source: S&P Capital IQ.
Will Nordic American Tankers sink or swim in 2012?
All in all, investors seem pretty pessimistic about Nordic American's prospects for this year. The target price for stock is less than $1 higher than its current share price, and projected losses for the just-ended year as well as 2012 don't show much enthusiasm for the stock or the industry overall.
Along with industrywide overcapacity, new energy production trends aren't working in tanker companies' favor. With increased exploration activity and new discoveries in the U.S., the need to move oil around the world decreases. That trend hit Ship Finance International (NYS: SFL) , which saw profits plunge 21% in its most recent quarter on lower spot shipping rates.
In addition, restructuring in the industry has introduced new risks. Frontline (NYS: FRO) recently had to restructure its operations to address a big quarterly loss that threatened to force the tanker company to breach debt covenants. Debt has already played a big part in the decline of dry bulk shipper DryShips (NAS: DRYS) , which has seen its shares plunge.
But Nordic American is actually in good shape on the debt front, with a debt-to-equity ratio of just 19%. That speaks well to the company's ability to maintain its dividend, which is among the highest in the industry.
In the end, positive economic news could be the thing that turns Nordic American's shares around. But if renewed economic pressure hurts global trade again, the stock could be in for further rough sailing.
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At the time this article was published Fool contributor Dan Caplinger doesn't own shares of the companies mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Fool has a disclosure policy.
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