Maersk Disappointed, But The Shipping Giant Has Been Dealing With Extenuating Circumstances...

Maersk Disappointed, But The Shipping Giant Has Been Dealing With Extenuating Circumstances...
Paul Allison, CFA

25 days ago2 mins

Mentioned in story

What’s going on here?

Maersk’s results, outlook, and buyback decision all disappointed analysts, but at least the Danish shipping giant can blame the world for its woes.

What does this mean?

Stormy waters, high winds, and circling sharks are just a day in the office for shipping companies. Global economic slowdowns and attacks in the Red Sea, not so much. While Maersk can stack twenty-foot containers like the best of them, it can’t do much about a lack of global trade – a result of thinly spread economies watching their spare change – or a majorly inconvenient no-go zone. So with the cost of taking longer but safer routes eating into the limited money Maersk brings in, the company expects to make anywhere between $1 and $6 billion in profit this year. That wide range hardly exudes confidence, and even the upper limit – just two-thirds of last year’s takings – only matches analysts’ expectations. So when Maersk topped it all off by suspending its buyback, which might’ve buoyed up the company’s shares, investors sent the stock down nearly 15%.

Maersk stock
Source: Google Finance

Why should I care?

For markets: Oh ship.

Shipping companies aren’t completely at the whim of the world, of course. Even if they’re tasked with fewer loads of cargo, they can charge more for the limited supply they do deliver. But don’t count on the corporate customers to front the cost: they’ll pass that buffer onto shoppers, a chain that could take inflation back out of central banks’ reach.

Shipping costs

The bigger picture: Time is a healer.

War, pandemics, and international stand-offs could make the hardiest news reader want to take a break from the headlines. So when money’s on the line, it’s understandable that investors turn flighty too. Thing is, even major setbacks tend to resolve themselves over time. And if not, money-hungry companies have a knack for making sure business goes on anyway, tinkering with their production schedules, prices, or suppliers to keep the books on balance.

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