Bank of America Securities analyst Ken Hoexter reiterated a Hold rating on Scorpio Tankers (STNG – Research Report) today and set a price target of $42.00.
Ken Hoexter has given his Hold rating due to a combination of factors influencing Scorpio Tankers’ financial outlook. The company posted a better-than-expected first-quarter earnings per share, driven by lower vessel operating expenses, although these cost reductions are not expected to be sustainable in the long term. The time-charter equivalent rates were slightly above estimates, but still showed a significant year-over-year decline, indicating potential volatility in future earnings.
Despite the company’s efforts to reduce debt and lower its cash operating breakeven point, the outlook for tanker rates remains uncertain. Global uncertainties and regional tensions have temporarily boosted rates, but the increasing capacity in the market could lead to thinner cash flows. Additionally, the company’s recent investment in DHT Holdings adds complexity to its financial strategy. As a result, Ken Hoexter maintains a Neutral stance with a price objective of $42, balancing the positive cash flow prospects with the risks of decelerating rates and rising fleet capacity.
In another report released yesterday, Stifel Nicolaus also maintained a Hold rating on the stock with a $44.00 price target.