NEW YORK (TheStreet) -- Shares of Frontline (FRO) were gaining 38% to $2.25 Friday following reports that a record number of oil tankers are sailing to China as the country is starting to stockpile oil.
A total of 83 very large crude carriers, such as those owned by Frontline, were sailing to Chinese ports Friday, according to Bloomberg. The ships would be able to transport 166 million barrels of crude oil, assuming standard cargo limits.
Shipping rates for tankers from the Middle East to Asia increased to $83,605 on Friday, according to Baltic Exchange data, the highest prices since January 2010. Swaps on the route point to daily average earnings of $77,964 for tankers in December.
TheStreet Ratings team rates FRONTLINE LTD as a Sell with a ratings score of D. TheStreet Ratings Team has this to say about their recommendation:
"We rate FRONTLINE LTD (FRO) a SELL. This is driven by multiple weaknesses, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. The company's weaknesses can be seen in multiple areas, such as its poor profit margins and generally disappointing historical performance in the stock itself."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The gross profit margin for FRONTLINE LTD is rather low; currently it is at 19.87%. Regardless of FRO's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, FRO's net profit margin of -65.75% significantly underperformed when compared to the industry average.
- FRO's stock share price has done very poorly compared to where it was a year ago: Despite any rallies, the net result is that it is down by 64.29%, which is also worse that the performance of the S&P 500 Index. Investors have so far failed to pay much attention to the earnings improvements the company has managed to achieve over the last quarter. Naturally, the overall market trend is bound to be a significant factor. However, in one sense, the stock's sharp decline last year is a positive for future investors, making it cheaper (in proportion to its earnings over the past year) than most other stocks in its industry. But due to other concerns, we feel the stock is still not a good buy right now.
- Regardless of the drop in revenue, the company managed to outperform against the industry average of 6.3%. Since the same quarter one year prior, revenues slightly dropped by 1.9%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
- FRONTLINE LTD has improved earnings per share by 47.4% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, FRONTLINE LTD reported poor results of -$2.38 versus -$0.91 in the prior year. This year, the market expects an improvement in earnings (-$0.43 versus -$2.38).
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Oil, Gas & Consumable Fuels industry. The net income increased by 35.0% when compared to the same quarter one year prior, rising from -$120.28 million to -$78.23 million.
- You can view the full analysis from the report here: FRO Ratings Report