On Thursday, BofA Securities updated its outlook on ZIM Integrated Shipping Services (NYSE:ZIM), increasing the share price target to $9.20, up from the previous $9.00, while maintaining an Underperform rating on the stock.
The adjustment follows ZIM's announcement of an increased forecast for its fiscal year 2024 adjusted EBITDA and EBIT, anticipating stronger financial performance due to higher freight rates.
ZIM expects the first half of the year to see benefits from elevated spot rates, driven by a surge in demand and ongoing constraints in shipping capacity resulting from disruptions in the Red Sea and a shortage of equipment.
In response to these developments, BofA Securities has revised its 2024 EBITDA estimate for ZIM upwards by 16% to $1.54 billion and its EBIT estimate to $385 million, both figures aligning with the upper end of the company's guidance.
The revised price objective from BofA Securities is a reflection of the updated earnings estimates, with the firm's second-quarter realized freight rate prediction now standing at a 32% year-over-year increase, a significant jump from the previously estimated 12%.
Despite the raised estimates and price target, the Underperform rating is reiterated due to the potential 50% downside to the new price objective.
ZIM's updated financial guidance is a result of its anticipation of adjusted EBITDA ranging between $1.15 billion and $1.55 billion, with adjusted EBIT projected to be anywhere from $0 to $400 million.
This outlook is based on the company's expectations of continued higher freight rates, which have prompted the upward revision in earnings estimates by analysts.
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