Costamare, an ocean-going shipping company, experienced a significant surge in its stock price, jumping 23.1% as of 12:34 p.m. ET. The company’s strong sales figures were the main catalyst for this positive investor reaction. However, despite the initial success, storm clouds may be gathering on the horizon.
Analysts had originally predicted that Costamare would earn $0.59 per share (adjusted for one-time items) on sales of $256.5 million. While the company fell slightly short of this adjusted earnings target, only earning $0.56 per share, it did exceed expectations in terms of sales revenue. Costamare reported voyage revenue of $365.9 million, a significant 43% better than expected and a 26% year-over-year improvement.
Although sales are rebounding, the market for container ships is softening, according to CFO Gregory Zikos. This softening market trend could potentially impact the company’s revenues and profits in the future. However, investors can take some comfort in the fact that 99% of Costamare’s container ship fleet is already under contract for the rest of this year, with 87% contracted through 2024. This means that any immediate impact from the softened market is expected to be minimal.
Additionally, Costamare has been leveraging the elevated rates on dry bulk shipping to boost its new dry bulk business. In the second quarter, the company’s owned dry bulk vessels traded on a spot basis, with the trading platform now consisting of 56 ships. While this strategy paid off in Q2, it may not be as favorable in Q3 as dry bulk spot rates started falling sharply in May.
The unexpected positive reaction from the market to Costamare’s strong Q2 sales is undoubtedly good news for shareholders. However, caution is advised as rough seas could lie ahead in Q3. The storm clouds may eventually have an impact on the company’s financial performance. Therefore, shareholders should remain cautious and prepared for potential challenges in the future.
