ZIM vs. ESEA: Which Shipping Company is a Stronger Play Now?

ZIM Integrated Shipping ZIM and Euroseas Limited ESEA are two well-known names in the Zacks Transportation - Shipping industry. While ZIM is based in Israel, ESEA is headquartered in Greece. ZIM is a leading container liner shipping company with a presence in more than 100 countries. The company serves approximately 33,000 customers at more than 330 ports worldwide. Euroseas is an owner and operator of container carrier vessels and a provider of seaborne transportation for containerized cargoes.Given this backdrop, let’s take a closer look at which shipping company currently holds the edge, and more importantly, which might be the smarter investment now.The Case for ZIMThe shipping company has an asset-light model, which means that the focus is more on leasing rather than owning vessels. This allows it to adjust capacity rapidly in response to market changes.ZIM’s focus on niche markets and high-margin trade routes helps it avoid crowded, low-margin segments, thereby maintaining strong pricig power. ZIM’s operational efficiency is being aided by investments in digitalization and innovative technologies.ZIM’s shareholder-friendly approach throws light on its financial prosperity. The shipping company’s high dividend yield is a huge positive for income-seeking investors. This highlights confidence in its cash flow and prospects. In the December quarter, ZIM’s board declared a regular dividend of approximately $382 million or $3.17 per ordinary share. Together with the dividends shelled out in 2024, the payout represents approximately 45% of the full year’s net income.The U.S. administration’s decision to impose port fees on Chinese-built ships logging at U.S. ports is a big challenge for the Israel-based shipping company. With more than 50% of its U.S. port calls made by Chinese-built ships, ZIM faces a big challenge. A "port call" refers to a ship's scheduled stop at a port for operations like loading, unloading cargo, or other activities related to ships. With a high proportion of ZIM’s total fleet capacity deployed on the Asia-North America trade route, finding an alternative deployment represents a big challenge.Declining freight rates could put pressure on ZIM’s future earnings. On the fourth-quarter conference call, management expressed concerns about declining freight rates. Taking into account the high degree of uncertainty related to global trade, geopolitical issues and the timing of the Red Sea opening, ZIM’s management issued dull 2025 projections for key metrics. The shipping company expects adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) to be in the range of $1.6-$2.2 billion in 2025. Adjusted EBIT (earnings before interest and taxes) for 2025 is expected to be in the range of $350-$950 million. Adjusted EBITDA in 2024 was $3.69 billion, reflecting a year-over-year increase of 252%. Adjusted EBIT in 2024 was $2.55 billion against an adjusted EBIT loss of $422 million in 2023.The Case for ESEAEuroseas has been benefiting from profitable contracts and maintains a time charter equivalent rate (a measure of the average daily net revenue performance of the company’s vessels) of more than $25,000 per day. The average daily time charter equivalent rate for 2024 was 26,479.The Houthi militants' attacks on vessels passing through the southern Red Sea have crippled trade through the Suez Canal, driving many container shipping companies like ESEA to add 10-14 days to the voyages between Asia and Europe. The prolonged Red Sea crisis has prompted the usage of more vessels. As a result, the crisis is causing a shortage of shipping containers.ESEA’s shareholder-friendly approach highlights its financial bliss. The shipping company’s high dividend yield is a huge positive for income-seeking investors. (Check Euroseas’ dividend history here).The company is also active on the buyback front. On the fourth-quarter 2024 conference call, management stated that as of Feb. 27, 2025, the company repurchased 425,000 shares of its common stock, since the initiation of the program in 2022, for approximately $9.25 million. ESEA’s fleet-expansion efforts are praiseworthy as well.ZIM’s Price Performance Better Than ESEA’s In a year, ZIM shares have gained 12.4%, outperforming the industry. On the other hand, ESEA shares have performed much worse, declining 14.8% in a year. However, the industry has witnessed a steeper decline.One-Year Price ComparisonImage Source: Zacks Investment ResearchHow Do Zacks Estimates Compare for ZIM & ESEA?Mainly due to the tariff-related uncertainty, the Zacks Consensus Estimate for ZIM’s 2025 sales and EPS implies a year-over-year decline of 22.5% and 94%, respectively. The EPS estimates have been trending southward over the past 60 days.Image Source: Zacks Investment ResearchThe Zacks Consensus Estimate for ESEA’s 2025 sales implies a year-over-year improvement of 5.3%. EPS estimates, however, call for a year-over-year downside of 3%. EPS estimates have been trending southward over the past 60 days.Image Source: Zacks Investment ResearchConclusionThe shipping industry is responsible for transporting goods involved in world trade. The slowdown in trade may disrupt trade routes, affect goods transportation and in turn hurt industry players. This trade war is expected to result in increased volatility and uncertainty going forward. Consequently, tariff-related concerns are present for both ZIM and ESEA.However, ZIM has an advantage, courtesy of its business model, by virtue of which it can shift capacity to more profitable routes if trade lanes are hit by tariffs. ESEA has less flexibility with its ships, which are usually chartered for specific durations. ESEA’s revenues are tied to the health of the charter market, which is sensitive to global trade volumes.Moreover, with spot rates and contracted rates remaining elevated, ZIM is likely to perform well in 2025 despite the tariff-induced uncertainties. ZIM’s price performance also suggests that it might be a better pick than ESEA now.While ZIM carries a Zacks Rank #3 (Hold), ESEA is currently #4 Ranked (Sell). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here5 Stocks Set to DoubleEach was handpicked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2024. While not all picks can be winners, previous recommendations have soared +143.0%, +175.9%, +498.3% and +673.0%.Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.Today, See These 5 Potential Home Runs >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Euroseas Ltd. (ESEA): Free Stock Analysis Report ZIM Integrated Shipping Services Ltd. (ZIM): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks