ZIM Stock Appreciates 17.2% in a Month: Should You Bet on it Now?

Shares of ZIM Integrated Shipping ZIM have performed very well over the past 30 days, gaining 17.2%, above the Zacks Transportation - Shipping industry’s 13.2% uptick and fellow shipping company Seanergy Maritime Holdings Corporation’s SHIP 6.4% gain in the same timeframe. Another shipping company, Euroseas Limited ESEA, has performed even better, gaining 20.3% in the past month.

One-Month Price Comparison

Signs of Easing Trade Tensions Aid ZIM Stock

The shipping industry, of which ZIM is an integral part, has been badly hit by trade tensions. This is because the industry is responsible for a large majority of goods involved in world trade. Trade-related tensions have the potential to slow down the transportation of goods.

In this backdrop, the signs of easing trade tensions, which have emanated from late last month, are highly welcome. President Trump and Treasury Secretary Scott Bessent hinted that the 145% tariffs on Chinese goods could be reduced soon. Bessent believes that the current scenario is “unsustainable.” Trump is also exploring pauses on certain tariffs, particularly on auto imports and some consumer electronics.

Bessent struck an optimistic tone during a private investor summit last month, suggesting that the current state of U.S.-China tariffs is not viable in the long term. He expects more "clarity" on tariffs in the months ahead. During Vice President JD Vance's visit to India last month, discussions included cooperation in technology, defense and energy, with the White House noting “progress” on several fronts.

These updates on the possibility of trade tensions easing boosted shipping stocks like ZIM, which has a presence in more than 100 countries, including China. The developments contributed to the Israel-based leading container liner shipping company’s recent impressive share price performance. 

Further Factors Working in ZIM’s Favor

Impressive Business Model: The shipping company’s asset-light model, which means that the focus is more on leasing rather than owning vessels, allows it to adjust capacity rapidly in response to market changes. This practice helps boost profits during high demand.

ZIM’s focus on niche markets and high-margin trade routes helps it avoid crowded, low-margin segments, thereby maintaining strong pricing power. This, too, aids profitability. The shipping company’s operational efficiency is being aided by investments in digitalization and innovative technologies.

Shareholder-Friendly Approach: ZIM’s shareholder-friendly approach throws light on its financial prosperity. The shipping company’s high dividend yield is a huge positive for income-seeking investors. This highlights confidence in its cash flow and prospects. In the December quarter, ZIM’s board declared a regular dividend of approximately $382 million or $3.17 per ordinary share. Together with the dividends shelled out in 2024, the payout represents approximately 45% of the full year’s net income.

Impressive Earnings Surprise History: Driven by factors like high revenues and carried volumes, the shipping stock outpaced the Zacks Consensus Estimate for earnings in three of the past four quarters (missing the mark in the other one), with the average beat being 19.3%.

ZIM Integrated Shipping Services Price and EPS Surprise

ZIM Integrated Shipping Services price-eps-surprise | ZIM Integrated Shipping Services Quote

Compelling Stock Valuation: ZIM stock is quite cheap, as its Value Score of A does not suggest a stretched valuation at this moment. In terms of price-to-sales, ZIM is trading at a forward sales multiple of 0.28X, which is not only lower than the industry average but also other shipping companies like Seanergy Maritime Holdings and Euroseas Limited. Seanergy Maritime Holdings and Euroseas Limited also currently have a Value Score of A like ZIM.

ZIM’s P/S F12M Vs. Industry, SHIP & ESEA

ZIM’s Bearish Guidance Hurts Estimate Revisions

On the fourth-quarter 2024 conference call in March, management expressed concerns about declining freight rates. Taking into account the high degree of uncertainty related to global trade, geopolitical issues and the timing of the Red Sea opening, ZIM’s management issued dull 2025 projections for key metrics. The shipping company expects adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) to be in the range of $1.6-$2.2 billion for 2025. Adjusted EBIT (earnings before interest and taxes) for 2025 is expected to be in the range of $350-$950 million. Adjusted EBITDA in 2024 was $3.69 billion, reflecting a year-over-year increase of 252%. Adjusted EBIT in 2024 was $2.55 billion compared to an adjusted EBIT loss of $422 million in 2023.

In the past 60 days, the Zacks Consensus Estimate for ZIM’s first-quarter and second-quarter 2025 earnings and full-year 2025 earnings have moved south.

Not an Opportune Time to Buy ZIM Stock

There is no doubt that the stock is attractively valued. Its recent price surge is also impressive. The company’s shareholder-friendly initiatives further add to its appeal. However, the bearish outlook given by ZIM management cannot be ignored. Declining earnings estimates also do not help matters. Although signs of trade tensions easing have emerged, until a concrete trade deal is inked, we are not out of the woods as far as this uncertainty is concerned.

Given the current scenario, it is not at all advisable to buy this Zacks Rank #3 (Hold) stock. Investors should monitor the company’s developments closely for an appropriate entry point. For those who already own the stock, it will be prudent to stay invested.

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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