Trade Tensions Hurting ZIM's Outlook: What's the Road Ahead?

ZIM Integrated Shipping ZIM, which had a stupendous 2024 courtesy of the Red Sea Shipping crisis-induced elevated freight rates, has been suffering this year mainly due to the tariff tensions.

The ongoing trade tension does not bode well for ZIM, as it has significant exposure to both China and the United States. Transpacific volumes have been suffering due to trade woes hurting ZIM. Although tariff woes are showing signs of easing, but in the absence of a long-term trade deal, the scenario will continue to be uncertain. Even on the first-quarter conference call, management sounded cautious regarding transpacific trade during the remainder of 2025 in the absence of a longer-term agreement.

The current administration is focused on protectionism, which restricts international trade to benefit domestic industries. The new port fees for Chinese-linked ships under the U.S. Trade Representative regulation represent a challenge both operationally and financially for ZIM, as more than 50% of its U.S. port calls are made by Chinese-built ships. With a significant proportion of ZIM’s fleet capacity deployed on the Asia-North America trade route, finding alternative deployment options represents a big challenge.

Due to the uncertainty, ZIM gave a cautious outlook for 2025. Adjusted EBITDA is projected in the $1.6-$2.2 billion range, down from $3.7 billion in 2024. The 2024 figure reflected a year-over-year increase of 252%. Adjusted EBIT (earnings before interest and taxes) for 2025 is expected to be in the range of $350-$950 million. In 2024, the metric was $2.55 billion against a loss of $422 million in 2023. Management has warned that declining freight rates could put pressure on ZIM’s future earnings.

Trade Woes Hurt Views of Other Transportation Players

United Parcel Service UPS, a giant in the parcel delivery space, refrained from providing any updates to the previously issued consolidated outlook for full-year 2025 until there is more certainty in the macro environment. UPS has been suffering from revenue weakness as trade-related uncertainty and higher inflation continue to hurt consumer sentiment and growth expectations. The weak demand scenario has led to a decline in the volume of packages shipped by UPS.

While releasing first-quarter 2025 results in April, airline heavyweight American Airlines AAL also withdrew its 2025 financial guidance due to the tariff-induced slowdown in air travel demand. American Airlines’ management stated that it would provide an update later in the year as visibility improves. Further updates will be available when American Airlines releases its second quarter results on July 24.

ZIM’s Price Performance, Valuation and Estimates

Shares of ZIM have lost 26.7% so far this year against the Zacks Transportation-Shipping industry’s 0.2% growth in the same time frame.

YTD Price Comparison

From a valuation standpoint, ZIM trades at a 12-month forward price-to-sales of 0.3X. ZIM is inexpensive compared with its industry.

The Zacks Consensus Estimate for ZIM’s 2025 and 2026 earnings shows a year-over-year decline.

ZIM's Zacks Rank

ZIM currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

 

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This article originally published on Zacks Investment Research (zacks.com).

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