Frontline Tops Estimates; Outlook Mixed

Oil tanker bellwether Frontline beats the Street, but the shipper's outlook for the rest of the year is mixed at best.
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HAMILTON, Bermuda (TheStreet) -- Oil tanker operator Frontline (FRO) - Get Report reported earnings and revenue ahead of expectations in the first quarter.

Excluding one-time gains, Frontline posted earnings of 90 cents a share in the first quarter, vs. a Wall Street conensus estimate of 70 cents a share. The range of analysts' targets ranged widely, however, from 28 cents on the low side to $1.20 on the high.

Frontline's revenue came to $331.8 million, topping analyts' expectations of $281 million. Once again, though, estimates were scattershot, ranging from $376 million to $200 million.

Frontline also

hiked its dividend

to 75 cents in the first quarter, up from 25 cents.

Frontline shares opened Friday's session down 2% but have since rallied into the green. At about 10:00 a.m. EDT Friday, the stock was changing hands at $29.54, up 43 cents, or 1.48%.

Frontline said the average rate it fetched for its "very large crude carriers," or VLCCs, in the first quarter came to $49,200. Earlier,

Overseas Shipholding Group

(OSG) - Get Report

said in its

quarterly release

that its average spot rates for the first three months of the year came to $50,000, up from $24,000 in the fourth quarter.

The quarter-to-quarter ability for shippers to fall short, meet or beat Wall Street expectations is limited in its significance by the lack of revenue and operating expense data provided by the tanker companies.

Thus, it's all about the outlook for shippers of crude.

Even with the macroeconomic unrest and the recent drop in crude oil, Frontline said that "based on the trading results so far in the second quarter, the Board expects good results."

Frontline also addressed the industry-wide orderbook in its earnings release, a figure that has weighed heavily on the minds of investors. During the boom years, the industry went on a buying binge, ordering new ships by the hundreds. Now, with a fragile economic recovery growing ever more brittle, investors fear that all those new shippings coming out of shipyards this year and next will cause a glut.

But Frontline executives were optimistic. Even though the industry still has a high number of expected vessel deliveries in 2010 and 2011, it said, "The actual deliveries in 2009 and in the first quarter of 2010 have been significantly lower than anticipated and this development is likely to be further strengthened by the expected delays, slippage and cancellations of newbuilding orders."

Frontline said that the industry as a whole took delivery of 17 new VLCCs in the first quarter, fewer than original projections of 20. Meanwhile, 18 Suezmaxes hit the seas for the first time during the quarter, as opposed to the 24 initially slated for delivery.

-Reported by Eric Rosenbaum in New York.


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