What happened
Shares of oil tanker companyNordic American Tankers(NYSE: NAT) jumped as much as 12.4% in trading on Monday after reporting first-quarter 2023 financial results. Shares closed the day up 8.4%.
So what
Voyage revenue jumped to $87.1 million from $15.5 million a year ago, and the company swung from a $20.9 million loss to a $54.7 million profit from operations. Net income was $46.9 million, or $0.22 per share, and management said they would pay a $0.15 per share dividend.
Image source: Getty Images.
Time Charter Equivalent (TCE) rates for vessels were $60,005 per ship in the first quarter, which was the second-best first quarter in 28 years. And management said that a slowdown seen early in the second quarter will lead to an increase in pricing and demand later this year because of the low supply of Suezmax tankers. The spot rate for the second quarter has been $42,111 per share, and management said rates have moved higher from there.
Now what
Supply and demand is unbalanced in the tanker market, which is great for Nordic American Tankers. But these swings in profitability are common with companies over-building new tankers at market peaks, only to flood the market with supply. This means the good times we see right now may not last.
That said, the revenue and earnings trends seem strong for the tanker market, and we could see a great year. If management is prudent with its capital over the next few years, this could be a great stock. However, given the history of this business, that's just not a bet I'm willing to make.
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Travis Hoium has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
