Should You Buy Costamare Stock Ahead of Q2 Earnings?

Costamare CMRE is scheduled to release second-quarter 2024 results on Jul 31, before market open.

The Zacks Consensus Estimate for the to-be-reported quarter's earnings and revenues is pegged at 72 cents per share and $380.41 million, respectively.

The earnings estimate for the to-be-reported quarter has declined 6.5% over the past 60 days. The bottom-line projection indicates year-over-year growth of 28.6%. The Zacks Consensus Estimate for quarterly revenues suggests a year-over-year increase of 3.5%.

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CMRE has an impressive earnings surprise history, as reflected in the chart below.

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Earnings Whispers for Q2

Our proven model does not conclusively predict an earnings beat for Costamare this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. That's not the case here.

CMRE has an Earnings ESP of 0.00% and a Zacks Rank #3.

Factors Likely to Shape CMRE's Q2 Results

We expect CMRE's second-quarter bottom-line performance to have been affected by higher vessel operating expenses, mainly due to the increased average number of vessels in its fleet. High fuel costs are likely to have shot up total expenses.

With the normalization of economic activities, world trade has gathered pace, which is a positive for shipping stocks like Costamare. This is because the shipping industry is responsible for transporting a high proportion of goods involved in world trade.

Bullishness surrounding the containership market is a tailwind for Costamare. A ramp-up of manufacturing activities in Asia aids the containership market besides other factors. Favorable market conditions in the dry bulk sector are also likely to have aided CMRE's performance in the to-be-reported quarter. Factors like a build-up of iron ore inventories in China have resulted in higher capesize freight rates.

Price Performance & Valuation

Costamare, one of the leading owners and providers of containerships and dry bulk vessels for charter across the globe, has gained in excess of 35% on a year-to-date basis, outperforming not only its industry but also other shipping companies like Danaos Corporation DAC and Frontline plc FRO.

YTD Price Comparison

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From a valuation perspective, Costamare is trading at a discount compared to the industry going by its price/sales ratio. The reading is also below its median over the last five years. The company has a Value Score of A.

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Investor Considerations

The company's dry bulk and containership fleets are being aided by the ongoing Red Sea tensions. Reduced container availability due to the Red Sea tensions has resulted in a rise in freight costs. Costamare has been benefiting from the surge in dry bulk rates. Lower capacity is expected to boost earnings. Rates are likely to remain high for quite some time, which should aid Costamare.

CMRE's focus on fleet modernization and leasing is also impressive. The significant amount of contract coverage generated by CMRE lowers its exposure to shipping market volatility. The fleet renewal strategy improves operational efficiency. Even though CMRE's future looks bright, one should be mindful of headwinds like high vessel operating costs and fuel expenses apart from the escalated debt load.

Final Thoughts

Given the abovementioned headwinds, we believe that investors should refrain from rushing to buy CMRE before Wednesday despite it being attractively valued and having a lot in its favor. Instead, they should monitor the developments pertaining to the stock closely for a more appropriate entry point, as an erroneous and hasty decision could affect portfolio gains. If an investor already holds CMRE stock in his/her portfolio, sit tight, as the upcoming earnings report is likely to confirm the company's strong performance.

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