Maersk shares fell by 38%, and profits increased to almost $30 billion
12.10.2022 - 09:10
AP Moller-Maersk A/S is experiencing its most profitable year in its 118-year history. At the same time, this is the worst year in a decade – if you judge the performance of stocks.
The net profit of the Maersk shipping branch jumped to almost $30 billion. Shares fell 38% — after three years of growth, according to Bloomberg.
Investors expect Maersk’s future earnings to decline. At the same time, the transport giant’s net profit is currently equal to approximately 9% of the entire GDP of Denmark, where the company’s headquarters are located.
Maersk’s profits rose sharply as a shortage of shipping capacity, exacerbated by supply chain bottlenecks and lockdowns due to COVID-19, sent freight rates soaring. Rates have increased more than sevenfold since October 2019, and peaked in January this year, according to the Shanghai Shipping Exchange Container Index. Rates then fell by about 60% as ports opened and congestion eased.
As a result, the company’s earnings are on a roller coaster. According to the latest Bloomberg survey of 13 analysts, Maersk’s net profit will nearly double from an already strong 2021 level to a record $29.3 billion this year.
Next year looks very different, with analysts predicting Maersk’s net profit to fall by more than 70% to $7.97 billion.
As for Maersk shares, at the heart of the valuation dispute is how stable the company’s earnings are and which of its booked contracts — about 70% of its long-term business — are really worth pursuing (as spot rates fall).
Maersk shares are experiencing their worst year since the 2008 financial crisis. The stock is now down 38%, almost double the average performance of the Stoxx Europe 600 stock index.
The outlook for shipping will depend on a possible recession, in which higher consumer prices will reduce global demand for the goods Maersk carries on its ships. As congestion on supply lines around the world eases, capacity will also increase, meaning more vessels will compete for fewer goods.
