Maersk Earnings: We Enter the Eye of the Storm as Freight Rates Normalize

Shipping giant Maersk MAERSK B delivered a disappointing third-quarter update on Nov. 3. While nobody expected blowout numbers, it was the language and downbeat tone of the statement that has taken the wind out of investors’ sails, with the shares down more than 10% at time of writing. We maintain our DKK 17,600 fair value estimate for the stock, believing that a whole lot of negativity is baked into the share price at this point. That being said, investors hoping for a quick turnaround might be disappointed.

Having downgraded full-year guidance at the half-year point, management warned on Nov. 3 that EBIT will likely fall at the lower end of the guided range. The clear message from management was that the market environment is worsening. Freight rates are continuing to decline, impacting operating margins heavily. The company is taking steps to decimate its workforce to adapt to the new environment, while capital expenditure guidance for the next year has fallen markedly.

Management declined to give any guidance for 2024, but given the current trajectory of the situation it is not likely to be pretty, and the market on Nov. 3 is adjusting accordingly. While all of this sounds terrible, there is a silver lining. Volumes are starting to recover in the ocean business. While the danger of increased supply from competitors remains, Maersk is positioned well to weather the storm, having paid down debt significantly over the last few years.