With a mixed bag of economic data only getting more muddled, investors are looking to more specific indicators to assess the health and direction of the global economy. A.P. Moeller-Maersk ( OTCPK:AMKBY ), one of the world's biggest shipping companies, is out with its quarterly earnings, which are widely seen as a barometer for global trade and the supply chain. The Danish firm controls about one-sixth of the world's container trade, with offices across 130 countries and more than 100K employees worldwide.
By the numbers: Earnings before interest, tax, depreciation and amortization (EBITDA) fell 18% Y/Y to $6.54B, coming in below consensus estimates of $6.95B, and lower than the $10.9B seen last quarter. Freight rates also fell by nearly a quarter, compared to the previous three months, which is important to highlight when assessing the economic outlook. While things appear to be cooling fast - triggering fears about a recession - when looking deeper into the details, the economy appears to be readjusting from an "overconsumption of goods" to a "sharp correction in demand" after major pandemic-fueled bubbles.
For example, Maersk ( OTCPK:AMKBY ) expects the global container market to grow between -2.5% and +0.5% in 2023, which signifies a slowdown, but is a far cry from the "dark clouds on the horizon" it predicted just a quarter ago . In fact, the shipping giant based its guidance for 2023 "on the expectation that inventory correction will be complete by the end of the first half leading to a more balanced demand environment." Another common theme to many other industries, is that Maersk ( OTCPK:AMKBY ), which brought aboard a new CEO in December , is determined to "speed up our business transformation" and "increase our operational excellence" as it faces down macroeconomic headwinds.
Strategies will include streamlining and consolidating the increasingly sensitive supply chain, looking to score new business by becoming an integrated logistics provider, and diversifying revenue sources by expanding air freight services. "It wasn't hard over the last 12 months to make money," said Ditlev Ingemann Blicher, Maersk ( OTCPK:AMKBY ) President of Asia Pacific. "If you had something that could float and could carry your container - that was not hard. Now, skills matter." The shipping behemoth has also made some high-profile deal decisions, like recently ending a partnership with Mediterranean Shipping that could perhaps trigger a price war .
Outlook: Note that Maesk ( OTCPK:AMKBY ) is coming off the "best financial result in the history of the company," with 2022 witnessing an "exceptional” rise in ocean freight rates before dropping off in the back half of the year. With Maersk ( OTCPK:AMKBY ) now showing more of a decline, Marketplace author Wolf Report says this will only improve the valuation the company (do you agree?). Maersk ( OTCPK:AMKBY ) is also on the list of 10 large-cap stocks with the lowest P/E (with a ratio of 1.42). Check out the rest here .
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Shipping giant Maersk posts record earnings, but a rebalancing lies ahead