Frontline (FRO) Stock Gains on Higher Tanker Rates

NEW YORK (TheStreet) -- Shares of Frontline (FRO) gains 8.5% to close at $2.80 Friday as oil tanker rates rose due to accelerated shipments from Saudi Arabia and Iraq.

Ships earned $81,513 a day shipping 2 million barrels of crude oil on the benchmark route from Saudi Arabia to Japan on Friday, according to Bloomberg. The rate is 13% higher than the Thursday rate, and the highest for the time of year since 2009.

The increased shipments come after Saudi Arabia told OPEC it produced an average of 10.3 million barrels of oil a day in April. Iraq shipments will grow by about 700,000 barrels to 3.75 million barrels in May, according to Bloomberg.

About 5.4 million shares of Frontline were traded during regular trading Friday, above the company's average trading volume of about 2.3 million shares a day.

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 a number of negative factors, 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 currently lower than what is desirable, coming in at 26.96%. 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 -9.60% significantly underperformed when compared to the industry average.
  • FRO has underperformed the S&P 500 Index, declining 21.08% from its price level of one year ago. The fact that the stock is now selling for less than others in its industry in relation to its current earnings is not reason enough to justify a buy rating at this time.
  • Despite the weak revenue results, FRO has significantly outperformed against the industry average of 37.8%. Since the same quarter one year prior, revenues slightly dropped by 5.9%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
  • FRONTLINE LTD has improved earnings per share by 20.0% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past year. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, FRONTLINE LTD continued to lose money by earning -$1.66 versus -$2.38 in the prior year. This year, the market expects an improvement in earnings ($0.16 versus -$1.66).
  • The net income growth from the same quarter one year ago has exceeded that of the S&P 500 and greatly outperformed compared to the Oil, Gas & Consumable Fuels industry average. The net income increased by 0.4% when compared to the same quarter one year prior, going from -$13.03 million to -$12.98 million.
  • You can view the full analysis from the report here: FRO Ratings Report

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