Maersk Adds $6B to Forecast While Warning of Slowing Volume Growth
Citing continuing strength in ocean shipping and freight rates, A.P. Moller – Maersk previewed its strong financial results for the first quarter of 2022 while also raising expectations for the full year’s financial performance. The shipping giant, however, cautioned of reduced expectations for volume growth as part of the expected “normalization in ocean,” in the second half of 2022, which many analysts are reading as an early indicator of a slowing in the global economy and potential for a recession.
“The current earnings guidance is still based on an assumption of normalization in ocean early in the second half of 2022,” Maersk reported in a stock exchange announcement earlier today. Based on volume developments in the first quarter, Maersk said it is however revising downwards its outlook for the growth of global container demand. The company is now expecting the container market volumes to range between one percent negative to one percent positive from earlier projections for two to four percent growth.
Despite expectations that the market will slow in the second half of 2022, Maersk still increased its full-year earnings forecast by a quarter adding $6 billion to the previous guidance for $24 billion (EBITDA) for 2022. The company’s revised forecast of $30 billion is now ahead of the consensus analyst projection of $28.7 billion for 2022. The company also added $4 billion to its forecast for free cash flow saying it now projects total cash of $19 billion for the full year.
Maersk and many of the other large ocean carriers have been consistently talking of an expected normalization for the container shipping market this year. During earlier earnings reports they cited the unsustainability of the surges seen in 2021 in volumes and freight rates. However, the continued disruptions in the market while easing and contributing to the first declines in freight rates continued to drive the market during the first quarter.
Maersk’s strong outlook for the business was driven in part by its financial performance during the first quarter, which the company said was “ahead of previous expectations.” In the preview of first quarter results, the company said despite a seven percent decline in container volumes, freight rates continued strong coming in 71 percent head of a year ago. As a result, Maersk said it will report revenues of $19.3 billion in the first quarter with a profit of $9.2 billion (EBITDA).
Investors were undeterred by the potentially cautionary note in Maersk’s announcement. As major stock indexes continued their declines, the price of Maersk’s shares was up more than three percent in mid-day trading. Maersk will publish its results for the first quarter on May 4.