Here’s why the ZIM Integrated stock could slip 20% after earnings

ZIM Integrated stock price rallied for three consecutive weeks and reached its highest level since August 2022. It has soared by over 334% from its lowest level in 2023, making it one of the best-performing companies in Wall Street. This rally has brought its market cap to over $3.12 billion.

ZIM Integrated stock rises ahead of earnings

ZIM Integrated Shipping share price has done well in the past few months, helped by strong demand, higher shipping prices, and its fleet modernisation strategy.

The most recent financial results revealed that the company’s revenues rose by 48% in the second quarter to $1.98 billion. This growth happened as its carried volume soared to 952,000 TEUs, a 11% increase, while the average freight rate jumped to $1.674, a 40% jump. 

Shipping prices rose mostly because of the ongoing crisis in the Middle East that has reduced the number of ships traveling through the Red Sea. There are also concerns about the falling water levels in the Panama Canal.

Consequently, ZIM Integrated’s net income jumped to $373 million, a big increase from the $213 million loss it made in the second quarter of last year. 

Its adjusted EBITDA for the quarter was $766 million, a 179% annual increase. As a result, the company decided to pay a dividend of $112 million, as part of its policy to return a part of its profits to shareholders. 

The company also boosted its full-year guidance. Its full-year guidance for EBITDA will be between $2.6 billion and $3 billion. Its adjusted EBIT will be between $1.45 billion and $1.85 billion. 

The next key catalyst for the ZIM Integrated stock price will be its earnings, which are scheduled on November 20.

Analysts expect these numbers to show that its revenue rose by 89.5% in the third quarter to $2.41 billion. They also see its fourth-quarter revenue rising by 53.9% to $1.86 billion. For the year, analysts expect that its annual revenue will be $7.6 billion, a 47% increase from 2023.

ZIM Integrated stock has also restructured it Cross-Atlantic services linking the Mediterranean with North and South America. The new structure will start in February next year.

Substantial risks remain

ZIM stock price has also surged after the Federal Reserve and other central banks have started cutting interest rates. Lower rates reduce the cost of borrowing, which leads to more consumer spending.

However, the company has some substantial risks that could impact its stock price. First, global shipping costs are falling. Data by Drewry shows that the World Container Index has dropped from the year-to-date high of $5,900 to $3,440. 

That is a sign that its business growth will start slowing in 2025. Indeed, analysts expect its revenue will be $6.1 billion in 2025. They also see its earnings per share falling from a profit of $12.3 this year to a $1.01 loss in 2026. If this happens, it means that the firm will be forced to pause its dividend.

The other potential risk for the firm is Trump’s trade wars, which could disrupt demand in the coming months. 

ZIM Integrated stock analysis

ZIM chart by TradingView

The weekly chart shows that the ZIM share price has been in a strong bull run in the past few months. However, there is a risk that it could suffer a harsh reversal in the coming days or weeks.

It has formed a rising wedge pattern, which is one of the most popular bearish signs in the market. This breakout typically happens when the two lines are about to get to their confluence level.

The stock has also moved to the fifth phase of the Elliot Wave. Therefore, there is a risk that it could move to the correction wave, leading to a pull back. If this happens, the next point to watch will be at $20, which is about 23% below the current level. 

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