Morningstar | Maersk Sails Through the Squall in 1Q
No-moat Maersk delivered a reasonable 1Q trading update, with revenue up 2.5% year over year and a strong improvement on an operating income and cash flow basis. The commentary over the trading environment was quite negative, however, with a weaker macroeconomic environment being blamed for the reduced volumes seen on the Asia-North America route. While warning of the potential effects of this and new tariffs on global container volumes, management have maintained their full-year guidance. We do not expect to make any material changes to our forecasts following this update and reiterate our DKK 10,700 fair value estimate.The company has made significant progress restructuring the business over the last few years, becoming a purely focused transport business, reducing its debt pile, and taking out significant costs from its core businesses. Structurally, the situation continued to improve in 1Q. The remaining stake in Total has been sold, generating welcome cash flow, while net debt has been reduced by a further USD 2.4 billion over the period. Despite the uncertain macroeconomic environment, we believe the risk-reward equation based on the current share price firmly favors the investor, with more than 40% upside to our fair value estimate.
A.P. Moeller Maersk is an international shipping company. Co.'s operating segments are: Container shipping and related activities which include global container services, inland transportation, manufacturing and repair of containers and container depots, and logistics and forwarding activities; APM terminals; Tankers, offshore and other shipping activities which include tanker shipping of crude oil, oil products and gas, offshore drilling activities and operation of land rigs, supply vessel activities with anchor handling and platform supply vessels, ferry services and door-to-door transportation in Northern Europe; Oil and gas activities; Retail activity; and Shipyards and other activities.
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