Why Nordic American Tankers Is A 'Buy' Amid Global Crude Recovery: Analyst On Q2 Performance And Market Trends

B. Riley Securities analyst Liam Burke reiterated a Buy rating on Nordic American Tankers Limited (NYSE: NAT), raising the price target to $6 from $5.50.

NAT’s concentrated fleet remains well positioned for a global recovery in global crude oil consumption with the potential for upside operating leverage, Burke notes.

The company reported a Q2 FY23 revenue of $67.80 million, missing the consensus of $68.32 million. EPS for the quarter improved to $0.13 from a loss per share of $(0.02) in Q2 FY22, missing the consensus of $0.14.

The improvement in daily revenue per vessel was driven by expectations for higher Y/Y global crude consumption, Burke adds.

Q2 also gained from a strengthening market for Suezmax vessels with the shifting trade patterns caused by the EU ban on Russian oil and 1M barrels per day (bpd) production cut from Saudi Arabia, notes the analyst.

According to the analyst, the company has also capitalized on a solid spot rate environment to reduce earnings volatility by fixing a percentage of its fleet on longer-term fixed-time charters.

It is anticipated that the Saudi supply gap will be filled by other Middle East producers and the U.S., Brazil, and Mexico and shift trade patterns towards producers that are traditional markets for smaller crude carriers such as Nordic American’s Suezmax vessels.

The analyst adds that the production shift will also further increase overall crude vessel ton-mile demand. 

The company’s Suezmax fleet also benefited from the sourcing of crude by the EU from non-Russian producers, including Africa, the U.S., and Latin America. 

Suezmax rates should see a further jump from stepped-up production out of Guyana.

Price Action: NAT shares are trading higher by 4.41% to $4.1450 on the last check Tuesday.