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Nordic American Tanker (NYSE:NAT) and Tsakos Energy Navigation (TEN) are downgraded Thursday to Hold from Buy with respective $4 and $27 price targets at Jefferies, even as most tanker stocks are attractively priced with high free cash flow yields.
Jefferies analyst Omar Nokta is concerned about the age of the fleet at Nordic American (NAT), with one third of vessels built before 2010, which is having a noticeable impact on realized freight rates, and low free cash flow generation at Tsakos Energy Navigation (TEN), due to a relatively higher debt ratio and sizable newbuilding commitments.
Overall, Nokta notes tanker stocks have pulled back after peaking in May, with investor sentiment softening due to seasonally weak spot rates, compounded by uncertainty over factors including demand, refinery runs and OPEC decisions, but the ingredients are in place for a normal post-summer upturn, and tanker companies remain well-positioned with strong balance sheets and capital returns front-and-center.
Also in the group, the bank has Buy ratings for Ardmore Shipping (ASC), DHT (DHT), Frontline (FRO), Hafnia (HAFN), International Seaways (INSW), Scorpio Tankers (STNG), Teekay Tankers (TNK) and Torm (TRMD).