3 Stocks to Bet on From the Prospering Shipping Industry

The Zacks Transportation - Shipping industry is suffering from headwinds like inflationary pressures, resultant high interest rates, tariff woes and supply-chain disruptions. Despite the headwinds, positives like the 90-day extension to the pause in higher tariffs against China, low oil prices and improvement in the demand scenario of goods and commodities from the pandemic lows bode well for this key industry.
 
The prevalent scenario makes stocks like Dorian LPG LPG, Ardmore Shipping Corporation ASC and Euroseas ESEA attractive investment options. Higher technology-related costs may hurt profits in the near term, but will support margins in the long run.

Industry Overview

The companies belonging to the Zacks Transportation - Shipping industry, which is cyclical in nature, offer liquefied natural gas and crude oil marine transportation services under long-term, fixed-rate contracts with energy and utility bigwigs. Most participants focus on the seaborne transportation of crude oil and other oil products, globally. The industry also includes players that own, operate and manage liquefied natural gas carriers. Some participants are owners and operators of containerships for charter. The change in the e-commerce landscape due to the coronavirus impacts imply that shippers are relying more on third-party logistics providers. The well-being of the industry participants is directly proportional to the health of the economy. The resumption of economic activities after coming to a standstill during COVID-19 bodes well for the industry.

4 Shipping Industry Trends in Focus

Extension of China Tariff Deadline Acts as a positive: In April, President Donald Trump signed an executive order that will prevent high U.S. tariffs on Chinese goods from snapping back into effect for another 90 days. The talks between U.S. trade negotiators and their Chinese counterparts, which took place in Stockholm in late July, may have resulted in the extension of the deadline until mid-November. This is a huge positive for stocks in the shipping industry, which is responsible for transporting goods involved in world trade. The pause in tariffs is likely to result in a short-term uptick in imports, as importers would front-load (a strategy of importing or shipping goods in advance) volumes to get them in before higher tariffs take effect. The pause provides breathing room for global trade flows to remain steady, supporting container volumes and freight demand. This temporary stability helps shipping companies avoid abrupt disruptions in cargo movement between the United States and China, their largest trade lane.

Elevated Expenses to Hurt the Bottom Line: Regulations to enhance transparency have increased compliance costs for shipping companies for quite some time. Also, as industry players are constantly trying to upgrade technology to keep up with evolving customer needs, technology-related costs are expected to keep rising. Using AI and machine learning to enhance operational efficiencies may lead to increased expenses in the short term, but will ultimately support investment managers' operating margins in the long run.

Strong LNG Market: Upbeat demand for liquefied natural gas (LNG) represents a huge positive for shipping stocks. The elevated levels of inflation raised oil and natural gas prices. Moreover, amid the prolonged Russia-Ukraine war, Europe is likely to seek gas supplies outside Russia. This is expected to drive demand for LNG vessels.

Low Oil Prices Bode Well: The southward movement of oil prices bodes well for bottom-line growth of the industry participants. This is because fuel expenses are significant input costs for any transportation company. Crude oil has been struggling in 2025, with prices sliding to multi-month lows. Tariff concerns, weakening consumer confidence and production increase by OPEC+ have all contributed to this downward pressure. Oil price declined 6% in the April-June period. Oil tanker companies are the biggest beneficiaries of the oil price decline. Lower oil prices typically point to increased sales volume of oil. Tanker prices generally rise as buyers seek to move that volume.

 

Zacks Industry Rank Indicates Upbeat Prospects

The Zacks Transportation - Shipping industry lies within the broader Zacks  Transportation  sector. The industry currently carries a Zacks Industry Rank #98, which places it in the top 40% of 246 Zacks industries.

The group’s Zacks Industry Rank, basically the average of the Zacks Rank of all the member stocks, indicates sunny near-term prospects. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1.

Looking at the aggregate earnings estimate revisions, it appears that analysts are optimistic about this group’s earnings growth. The industry’s earnings estimates for 2025 have moved up 6% since July.

Before we present a few stocks that you may want to add to your portfolio, let us look at the industry’s recent stock-market performance and its valuation picture.

 

Industry Underperforms S&P 500 & Sector

The Zacks Transportation - Shipping industry has lagged the Zacks S&P 500 composite index as well as the broader sector over the past year.

Over this period, the industry has declined 20.2% against the S&P 500 Index’s northward movement of 16%. The broader sector has moved 6.1% south in the same timeframe.

1-Year Price Performance

 

 

Industry's Current Valuation

Based on the forward 12-month price-to-earnings (P/E- F12M), a commonly used multiple for valuing shipping stocks, the industry is currently trading at 6.82X compared with the S&P 500’s 22.86X. It is also below the sector’s P/E (F12) reading of 14.36X.

Over the past five years, the industry has traded as high as 10.54X, as low as 3.84X and at the median of 5.96X.
 

P/E Ratio (Forward 12-Month)

 

 

3 Transportation-Shipping Stocks to Buy Now

Dorian LPG operates a fleet of large gas carriers for transporting liquefied petroleum gases like propane and butane on long-haul voyages, mainly from the United States and the Middle East to Asia. The increased demand for liquefied petroleum gases from Asia has been a huge positive for the company. The stock has soared 56% over the past six months.

Dorian LPG currently sports a Zacks Rank #1 (Strong Buy). The Zacks Consensus Estimate for 2026 earnings indicates an increase of 18% on a year-over-year basis.

You can see the complete list of today’s Zacks #1 Rank stocks here.  

Price & Consensus: LPG

Euroseas is an owner and operator of container carrier vessels and a provider of seaborne transportation for containerized cargoes. The company has been benefiting from profitable contracts and maintains a time charter equivalent rate of more than $30,000 per day.

The stock has gained 41% over the past year. The company presently flaunts a Zacks Rank #1. The Zacks Consensus Estimate for 2025 earnings has increased 10.4% over the past 60 days.

Price & Consensus: ESEA

Ardmore Shipping engages in the ownership and operation of product and chemical tankers. It provides shipping services to customers through voyage charters, commercial pools and time charters.

The stock has gained 18% over the past six months. The company currently carries a Zacks Rank #2 (Buy). The Zacks Consensus Estimate for 2025 earnings has increased 2.6% over the past 60 days.

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Dorian LPG Ltd. (LPG): Free Stock Analysis Report
 
Euroseas Ltd. (ESEA): Free Stock Analysis Report
 
Ardmore Shipping Corporation (ASC): Free Stock Analysis Report

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

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