ZIM Stock Falls As Traders Digest Earnings Miss

Key Insights

• ZIM stock is down by 6% after the company missed analyst estimates on both earnings and revenue. 
• The company has updated its dividend policy to ensure a more stable income stream for its investors. 
• The current dividend yield is extremely attractive, but analysts expect that the company’s earnings will decline significantly in 2023.

ZIM Updates Its Dividend Policy

Shares of the marine shipping company ZIM Integrated Shipping Services are under material pressure after the release of the quarterly report.

ZIM reported revenue of $3.43 billion and GAAP earnings of $11.07 per share, missing analyst estimates on both earnings and revenue.

The company reaffirmed its previous 2022 guidance. In 2022, ZIM expects to generate adjusted EBITDA of $7.8 billion – $8.2 billion.

ZIM updated its dividend policy and will distribute approximately 30% of the net quarterly income of each of the first three fiscal quarters of the year.

The company maintains its expectation to distrubute 30-50% of annual net income. The decision will make the income stream more stable for investors. For the second quarter, ZIM declared a cash dividend of $4.75 per share.

What’s Next For ZIM Stock?

With a quarterly dividend of $4.75 per share, ZIM stock has a forward yield of about 40%, which attracts income-oriented investors.

However, traders should note that ZIM earnings depend on freight rates, which may change rapidly. Thus, it’s not surprising to see that the stock is down by 6% after an earnings miss, despite the juicy dividend.

The market is worried that freight rates have already peaked and that ZIM earnings will decline in the future. In fact, analysts believe that ZIM will report earnings of $44.97 per share in 2022 and earnings of just $15.09 per share in 2023.

At the same time, it should be noted that ZIM remains extremely cheap at just 3 forward P/E. Traders should keep in mind that the company owns a minority of its fleet, while the majority is chartered, which partially explains the current valuation. However, the cheap valuation and the attractive dividend yield may still provide some support to ZIM shares after the post-earnings sell-off.

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