Shipping giant Scorpio Tankers (STNG) released its earnings report for the fourth quarter of December 2023, showingcasing a better-than-expected performance in earnings per share (EPS), but a decline in revenues.
The company reported adjusted EPS of $2.75, surpassing the consensus estimate of $2.62. However, revenues declined by 31.9% year-over-year to $336.3 million, slightly missing consensus of $335.7 million.
Adjusted net income for the fourth quarter was $142.2 million, resulting in basic and diluted EPS of $2.85 and $2.75, respectively. The adjustments made to the net income figures include several factors. Firstly, a write-off or acceleration of the amortization of deferred financing fees on specific lease financing obligations and related debt extinguishment costs led to a decrease in net income by $7.3 million or $0.15 per basic and $0.14 per diluted share. Secondly, a gain of $4.9 million or $0.10 per basic and $0.09 per diluted share from the sale of a vessel was not considered in the adjusted net income calculations. Additionally , an acceleration of the amortization of restricted stock awards, triggered by the departure of the company's former CFO in October 2023, resulted in a reduction of net income by $8.4 million or $0.17 per basic and $0.16 per diluted share. Finally, the write-off of previously incurred costs related to the unexercised options to purchase scrubbers on 11 MR product tankers amounted to $10.5 million or $0.21 per basic and $0.20 per diluted share.
Comparing these results with the fourth quarter of the previous year, Scorpio Tankers experienced a significant decline. In December 2022, the company reported a net income of $264.4 million, showing a decrease of around 54.2%. The basic and diluted EPS for the same quarter were $4.74 and $4.37, respectively.
Turning to the revenue breakdown by vessel class, Scorpio Tankers operate in different segments. LR2 class vessels, representing 68% of days, generated an average daily Time Charter Equivalent (TCE) revenue of $57,000 in the Pool and Spot Market for 2,600 expected revenue days.
For Time Charters Out of the Pool, the average daily TCE revenue stood at $30,750 for 875 days, accounting for 100% of the time. MR class vessels, constituting 59% of days, earned an average daily TCE revenue of $34,500 in the Pool and Spot Market for 4,650 expected revenue days.
When chartered out of the pool, the average daily TCE revenue was $21,700 for 400 days, covering 100% of the days. For Handymax vessels, which accounted for 55% of days, the average daily TCE revenue in the Pool and Spot Market was $32,500 for 1,250 expected revenue days. Unfortunately, there is no available data for Handymax vessels under Time Charters Out of the Pool.
Despite the decline in revenues, Scorpio Tankers demonstrated stronger-than-expected earnings, surpassing estimates. The company's decision to increase its quarterly dividend from $0.35 per share to $0.40 per share indicates management's confidence in the financial position and their commitment to returning value to shareholders.
Moving forward, investors may closely monitor Scorpio Tankers' ability to reverse the decline in revenues and sustain its earnings growth. Factors such as the performance of different vessel classes and the company's strategy to navigate challenging market conditions can influence its future financial performance.