Is ZIM Integrated Shipping Services Ltd. (ZIM) Navigating Towards Higher Profits?

Haifa, Israel-based ZIM Integrated Shipping Services Ltd. (ZIM) is an international container shipping and related services provider. The company offers door-to-door and port-to-port transportation services for various types of customers.

ZIM operates through its strong fleet across various horizons. As of March 1, 2024, the company operated a fleet of 150 vessels, consisting of 134 container vessels and 16 vehicle transport vessels. During the year 2024, it has strategically expanded its operational capacity by adding new, larger, modern, cost-effective vessels to its fleet.

Also, the company’s strategic diversification in digital solutions with innovative technologies allows it to cater to a wider customer base. Its digital solutions, including myZIM Personal Area, ZIMonitor, eZIM, Mobile app, and ZIM API, offer shipment management, monitoring, registration for online booking, and easier access to its cargo services.

The company is set to release its fourth quarter and full year 2024 financial results on Wednesday, March 12, 2025, before the stock market opens, and as per the projections and street expectations, the company will report impressive results. During the last reported third quarter, the company posted a total revenue of $2.77 billion, surpassing the consensus estimate of $2.41 billion. Also, its non-GAAP EPS was $9.34 for the third quarter, compared to analysts’ expectations of $7.20.

Further, during the third quarter, ZIM’s average freight rate per TEU was $2,480, indicating increase of 118% year-over-year. The company’s adjusted EBITDA margin and adjusted EBIT margin also significantly rose to 55% and 45% from the prior year margins of 17% and negative 17%.

Further, the company updated its full-year 2024 guidance, increasing its adjusted EBITDA expectation between $3.30 billion and $3.60 billion from the prior range of $2.60 billion - $3 billion. Also, ZIM expanded its adjusted EBIT between $2.15 billion and $2.45 billion.

ZIM’s shares are also a testament to the company’s strong standings. Shares of ZIM have surged 28.6% over the past month and 79.3% over the past year to close its last trading session at $21.85.

Let’s look at factors that could influence ZIM’s performance in the upcoming months.

Positive Recent Developments

On September 9, 2024, ZIM entered into a long-term operational cooperation with Mediterranean Shipping Company on the Asia - US East Coast and Asia - US Gulf trades. The new services were scheduled to be launched in February 2025, subject to regulatory approvals and filings. The agreement included six Asia to USEC and USGC services.

Robust Financials

ZIM’s total revenues increased 117.2% year-over-year to $2.77 billion during the third quarter that ended September 30, 2024, and its gross profit for the same period was $1.31 billion. The company’s adjusted EBITDA of $1.53 billion indicates substantial growth of 625.6% from the prior year’s quarter.

In addition, the company’s profit for the period and EPS came in at $1.13 billion and $9.34, against a loss of $2.27 billion and $18.90 per share during the prior year’s period, respectively. ZIM’s free cash flow increased 343.3% from the year-ago value to $1.45 billion.

Also, the company’s total assets stood at $11.02 billion as of September 30, 2024, compared to $8.19 billion as of September 30, 2023.

Favorable Analyst Estimates

Analysts expect ZIM’s revenue for the fourth quarter (ended December 2024) to increase 65.5% year-over-year to $1.99 billion, and the consensus EPS estimate for the same period is $3.22.

For the fiscal year ended December 2024, the company’s revenue is expected to grow 60.4% year-over-year to $8.28 billion, while its EPS is expected to be $16.54. Additionally, Street expects the company’s revenue and EPS for the fiscal year 2025 to be $6.64 billion and $1.37, respectively.

High Profitability

ZIM’s trailing-12-month gross profit margin and EBIT margin of 41.80% and 24.66% are 31.1% and 137.1% higher than the respective industry averages of 31.87% and 10.40%, respectively. Its trailing-12-month net income margin of 19.26% is considerably higher than the industry average of 6.40%.

Furthermore, the stock’s trailing-12-month ROCE, ROTC, and ROTA of 44.28%, 13.46%, and 13.05% favorably compares to the industry averages of 13.06%, 6.99%, and 5.14%, respectively. Similarly, its trailing-12-month levered FCF margin of 22.96% is significantly higher than the industry average of 6.97%.

Low Valuation

In terms of forward non-GAAP P/E, ZIM is currently trading at 1.32x, 93% lower than the industry average of 18.92x. The stock’s forward EV/Sales and Price/Sales of 0.74x and 0.32x are considerably lower than the industry averages of 1.92x and 1.47x, respectively.

The stock’s forward EV/EBITDA and forward Price/Book of 1.74x and 0.71x are 84.6% and 75.2% lower than the industry averages of 11.31x and 2.88x, respectively.

POWR Ratings Reflect Promise

ZIM’s solid fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, translating to a Buy in our proprietary system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.

Our proprietary rating system also evaluates each stock based on eight distinct categories. ZIM has an A grade for Value, in sync with its discounted valuation.

In addition, the stock has an A grade for Quality, consistent with its higher-than-industry profitability.

ZIM is ranked #6 in the 34-stock B-rated Shipping industry.

Beyond what I have stated above, we have also given ZIM grades for Sentiment, Momentum, Growth, and Stability. Get access to all the ZIM Ratings here.

Bottom Line

ZIM is due to report its financial results for the fourth quarter and full year 2024 on March 12. Analysts appear bullish about the company’s growth prospects, driven by growing demand for its innovative product offerings, expanding fleet capacity, and growing digitalization.

Moreover, the board of directors initiated a quarterly dividend of $2.81 per share and a special dividend of $0.84 per share, reflecting the company’s growing earnings power and diligent execution.

Considering ZIM’s solid financials, accelerating profitability, and promising growth outlook, this shipping stock could be an ideal buy now.

How Does ZIM Integrated Shipping Services Ltd. (ZIM) Stack Up Against Its Peers?

While ZIM has an overall POWR Rating of B, investors could also check out these other stocks within the B-rated Shipping industry with A (Strong Buy) or B (Buy) ratings:

Overseas Shipholding Group, Inc. (OSG), A.P. Moeller-Maersk A/S ADR (AMKBY), and Global Ship Lease Inc. Cl A (GSL).

For exploring more A and B-rated shipping stocks, click here.

What To Do Next?

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ZIM shares were trading at $22.44 per share on Tuesday afternoon, up $0.59 (+2.70%). Year-to-date, ZIM has gained 4.52%, versus a 1.52% rise in the benchmark S&P 500 index during the same period.

Rajkumari started her career as a writer but gradually shifted her focus to financial journalism, leveraging her educational background in Commerce. Fascinated by the interplay of business and economic shifts in equities, she aspires to evolve as an analyst. With a knack for simplifying complex financial concepts, her mission is to empower investors with insights that lead to profitable decisions.

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