With third-quarter earnings season set to open in earnest this week, investors will get a choice between rates strength and market momentum as they pick through the three principal operating sectors. Containership and dry bulk owners have seen record, or at least robust, markets that may already have peaked in some cases, but are set to “fall” to still enviable levels. Tankers, on the other hand, have been scudding along the bottom for more than a year and are set for a rebound, but one that has been slower and will perhaps be more stubborn than originally envisaged.

As owners in all three sectors prepare to lay cards on the table in the next few weeks, TradeWinds caught up with Jefferies lead shipping analyst Randy Giveans, who covers 29 US-listed stocks, for a look ahead. “It’s going to be interesting to me to see how investors react to what they’re hearing — does momentum win out or does underlying profitability prevail?” Giveans said. “Dry bulk and containers are coming down from peak levels in recent weeks … but still to really strong levels that are well above 10-year averages. Meanwhile, tankers are the opposite: rates are certainly heading higher, but to levels that are not extremely profitable and definitely not better than the 10-year figure.”

Analysts usually pay less attention to the past quarter’s numbers — these generally are largely known and already baked into the stock price — than to any guidance shipowners may offer as to rates booked to date in the current quarter. With all the volatility across the sectors, this will be especially true in the current batch of results, the Jefferies man said. “In the dry bulk sector, for example, we’ve seen capesize rates go from $80,000 per day to $40,000 [per day] in a few weeks — which owners were able to capture some of those $80,000 fixtures at the start of the quarter and which weren’t?” Giveans said. “Tanker owners have their own version of that. As we saw with rate guidance at the start of the third quarter, there was a pretty big range in strength. In that case, it will be interesting to see how these various owners finished the quarter. Who outperformed, who underperformed, and why? But the fourth-quarter guidance will be pretty meaningful as well.”

Giveans already has made his own adjustments to expectations in a quarterly earnings preview. Jefferies has raised its price targets, second-half earnings expectations and 2022 projections for the dry bulk names under its coverage, based on stronger-than-predicted rates in the past quarter and a fourth quarter that started even higher in some vessel classes. While there have been lots of negative headlines around declining capesize rates and lower Chinese iron-ore demand amid restricted steel production, Giveans likes the continued strong market for coal and its impact on smaller vessel classes. “The market is being minor-bulk pushed rather than capesize pulled,”Giveans said.

On the tanker side, it is the opposite, as Jefferies has reduced second-half and 2022 earnings projections, while either maintaining price targets or increasing them in the case of DHT Holdings, International Seaways, Frontline and Euronav. “While there is a demand recovery for crude currently underway, it is taking longer and rising at a much slower pace due to lingering Covid concerns than we expected,” Giveans said, applying much the same analysis to clean products rates. One nugget symbolic of the changing fortunes of the two markets: Jefferies projects VLCCs will earn $25,000 a day for full 2022, just a hair less than his $26,000 estimate for capesizes.

Earnings in the coming week will see insights from owners in dry bulk, where both Eagle Bulk Shipping and Genco Shipping & Trading are gearing up dividend payouts, and in the crude sector, where Euronav may shed further light on a 10% investment from tanker king John Fredriksen. Eagle has just instituted a quarterly dividend for the first time in chief executive Gary Vogel’s five-year tenure, while Genco is expected to once again incrementally bump up its payout for the third quarter before shifting to a high-payout model for earnings in the current quarter, Giveans said. Euronav chief executive Hugo De Stoop told Bloomberg last week that his company is not currently in merger discussions with Fredriksen’s Frontline and that any prospective merger would be friendly.