Tanking company Scorpio Tankers (NYSE:STNG) reported revenue ahead of Wall Street’s expectations in Q1 CY2025, but sales fell by 45.1% year on year to $214 million. Its GAAP profit of $1.22 per share was 69.3% above analysts’ consensus estimates.
Revenue: $214 million vs analyst estimates of $200.8 million (45.1% year-on-year decline, 6.6% beat)
EPS (GAAP): $1.22 vs analyst estimates of $0.72 (69.3% beat)
Adjusted EBITDA: $123.7 million vs analyst estimates of $98.52 million (57.8% margin, 25.6% beat)
Operating Margin: 28.2%, down from 62.9% in the same quarter last year
Free Cash Flow Margin: 29.9%, down from 54.3% in the same quarter last year
Market Capitalization: $1.74 billion
Company Overview
Operating one of the youngest fleets in the industry, Scorpio Tankers (NYSE: STNG) is an international provider of marine transportation services, specializing in the shipment of refined petroleum.
Sales Growth
A company’s long-term performance is an indicator of its overall quality. Any business can experience short-term success, but top-performing ones enjoy sustained growth for years. Over the last five years, Scorpio Tankers grew its sales at a mediocre 6.6% compounded annual growth rate. This was below our standard for the industrials sector and is a tough starting point for our analysis.
Scorpio Tankers Quarterly Revenue
Long-term growth is the most important, but within industrials, a half-decade historical view may miss new industry trends or demand cycles. Scorpio Tankers’s performance shows it grew in the past but relinquished its gains over the last two years, as its revenue fell by 21.3% annually. Scorpio Tankers isn’t alone in its struggles as the Marine Transportation industry experienced a cyclical downturn, with many similar businesses observing lower sales at this time.
Scorpio Tankers Year-On-Year Revenue Growth
This quarter, Scorpio Tankers’s revenue fell by 45.1% year on year to $214 million but beat Wall Street’s estimates by 6.6%.
Looking ahead, sell-side analysts expect revenue to decline by 7.8% over the next 12 months. While this projection is better than its two-year trend, it's hard to get excited about a company that is struggling with demand.
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Operating Margin
Scorpio Tankers has been a well-oiled machine over the last five years. It demonstrated elite profitability for an industrials business, boasting an average operating margin of 44.1%. This result isn’t surprising as its high gross margin gives it a favorable starting point.
Looking at the trend in its profitability, Scorpio Tankers’s operating margin rose by 39.5 percentage points over the last five years, as its sales growth gave it operating leverage.
This quarter, Scorpio Tankers generated an operating profit margin of 28.2%, down 34.6 percentage points year on year. The contraction shows it was less efficient because its expenses increased relative to its revenue.
Earnings Per Share
Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.
Scorpio Tankers’s full-year EPS flipped from negative to positive over the last five years. This is encouraging and shows it’s at a critical moment in its life.
Scorpio Tankers Trailing 12-Month EPS (GAAP)
Like with revenue, we analyze EPS over a shorter period to see if we are missing a change in the business.
Sadly for Scorpio Tankers, its EPS and revenue declined by 17.2% and 21.3% annually over the last two years. We tend to steer our readers away from companies with falling revenue and EPS, where diminishing earnings could imply changing secular trends and preferences. If the tide turns unexpectedly, Scorpio Tankers’s low margin of safety could leave its stock price susceptible to large downswings.
In Q1, Scorpio Tankers reported EPS at $1.22, down from $4.11 in the same quarter last year. Despite falling year on year, this print easily cleared analysts’ estimates. Over the next 12 months, Wall Street expects Scorpio Tankers’s full-year EPS of $10.15 to shrink by 31.9%.
Key Takeaways from Scorpio Tankers’s Q1 Results
We were impressed by how significantly Scorpio Tankers blew past analysts’ EPS expectations this quarter. We were also excited its EBITDA outperformed Wall Street’s estimates by a wide margin. Zooming out, we think this quarter featured some important positives. The stock traded up 1.9% to $38.40 immediately following the results.
Scorpio Tankers put up rock-solid earnings, but one quarter doesn’t necessarily make the stock a buy. Let’s see if this is a good investment. When making that decision, it’s important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it’s free.
