ZIM (NYSE: ZIM) Earnings Preview: Analysts See Profit Drop as Shipping Pressures Mount

ZIM Integrated Shipping Services Ltd. (NYSE: ZIM) is slated to release its Q2 2025 earnings before the market opens today. The question on everyone's mind: can ZIM deliver another earnings beat, or will the predicted decline materialize?

Analysts expect ZIM to report earnings per share (EPS) of $1.30 for the quarter, down significantly from $3.08 in the same quarter last year. Revenue is projected to decline 10.01% year-over-year, falling to $1.74 billion from $1.93 billion, reflecting ongoing pressure in the global shipping industry and softer freight rates.

Shares are currently priced at $15.75 (+1.25%) in today's pre-market, but a staggering -27% year-to-date. Markets are clearly apprehensive, weighing the company's recent successes against the looming uncertainties in the global shipping landscape.

The company's first-quarter performance offered a glimpse of both its strengths and the challenges it faces. ZIM reported a net income of $296 million, a substantial increase from $92 million in the same period last year. Revenues also saw a healthy 28% year-over-year jump, reaching $2.01 billion.

This growth was fueled by a 12% increase in carried volume (944,000 TEUs) and a 22% rise in average freight rates ($1,776 per TEU). ZIM's Adjusted EBITDA margin improved to 39% from 27%, and Adjusted EBIT margin increased to 23% from 11% in Q1 2024. Furthermore, the company reduced its net debt by $382 million to $2.49 billion, a positive sign for its financial health.

Reflecting its strong Q1 performance, ZIM declared a dividend of $0.74 per share, totaling approximately $89 million, representing 30% of the quarterly net income. This commitment to shareholder returns is a key component of the bull case for ZIM.

However, the market's reaction to the Q1 results was muted, with the stock experiencing a decline of approximately 4.58% following the earnings announcement back in March. This was largely attributed to the company's cautious guidance for 2025, which projected lower Adjusted EBITDA and EBIT compared to 2024.

CEO Eli Glickman has emphasized the company's focus on agile fleet management and responsiveness to market shifts, highlighting adjustments to their network to match changes in cargo flow from China and other Southeast Asian markets into the United States. This adaptability is crucial in navigating the volatile shipping environment.

The overarching concern remains the normalization of freight rates after the unprecedented highs seen during the pandemic. As global supply chains untangle and demand softens, freight rates are inevitably coming down, squeezing the profitability of shipping companies. This is reflected in the analyst consensus for a lower EPS in Q2.

It is important to remember that shipping rates, while down from the pandemic highs, are still above pre-pandemic levels. ZIM has proven adept at capitalizing on market opportunities, and it would be premature to write off its potential for continued profitability. Additionally, the aggressive share buyback program could offer a floor for the stock price and provide a boost to EPS.