Seaspan (SSW) to Report Q4 Earnings: Whats in the Offing?

Seaspan Corporation SSW is scheduled to release fourth-quarter 2018 earnings numbers on Mar 5.

In the last reported quarter, the company’s earnings of 36 cents per share outshined the Zacks Consensus Estimate by 11 cents. Quarterly earnings also increased significantly on a year over year basis driven by an impressive vessel utilization rate of 98.4%. Revenues too surpassed the Zacks Consensus Estimate.

However, the company does not have an impressive earnings surprise history. The earnings beat in third-quarter 2018 was the sole bottom-line outperformance in the trailing four quarters, the average miss being 1%.

Let’s see how things are shaping up for this earnings season.

We expect vessel utilization to be high in the fourth quarter as well, courtesy of increased utilization of Greater China Intermodal Investments or GCI vessels and new deliveries. The increase in the number of vessels owned should boost operating days (number of days a vessel is available for use to the charterer) in the quarter.

Apart from the presence of new vessels from the GCI acquisition, higher average charter rates are expected to boost revenues in the to-be-reported quarter.

The company expects fourth-quarter revenues between $291 million and $295 million, much higher than the year-ago reported figure of $211 million. We note that GCI was acquired by Seaspan in March 2018.

Cash flow from operations are also expected to be high in the fourth quarter, reflecting its financial strength. However, high operating expenses might limit bottom-line growth. Ship operating expense is expected to be between $58 million and $62 million, higher than the $55.4 million recorded in the third quarter of 2018.

Additionally, since rules to check pollution by ships are to be implemented next year, we expect an update regarding Seaspan’s preparedness on the impending change on the fourth-quarter conference call. Shipping companies like Seaspan, Golar LNG GLNG and Frontline Ltd. FRO may either switch to the highly expensive but lower sulfur marine gasoil or may install scrubbers (air pollution control devices), which would allow them to burn the less expensive high sulfur fuel oil. 

Earnings Whispers

Our proven model does not conclusively show that Seaspan is likely to beat estimates this earnings season. This is because a stock needs to have both — a positive Earnings ESP and a favorable Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) — for this to happen. But that is not the case here as elaborated below.

Earnings ESP: Seaspan has an Earnings ESP of 0.00%. This is because the Most Accurate Estimate is pegged at 28 cents, in line with the Zacks Consensus Estimate. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Seaspan carries a Zacks Rank #3, which increases the predictive power of ESP. However, a company needs to have a positive ESP as well to be confident of a likely earnings surprise. This combination leaves surprise prediction inconclusive.

A Stock to Consider

Investors interested in the Zacks Transportation sector may check Azul S.A. AZUL as it has the right combination of elements to beat estimates in its upcoming release.

Azul has an Earnings ESP of +7.22% and a Zacks Rank #1. The company will release fourth-quarter 2018 results on Mar 14. You can see the complete list of today’s Zacks #1 Rank stocks here.

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