13 July (Lloyd's List) - “IT’S tough to make predictions, especially about the future,” said baseball great Yogi Berra. Container line executives can relate.

Early each year, listed liner companies release full-year earnings guidance. That practice has led to some embarrassingly lowball prognostications over the past four years, first due to Covid, and this year, due to detours around the Cape of Good Hope.

Initial estimates have turned out, in many cases, to be billions too low.

This has led to rising scepticism toward liner guidance. Some stock investors believe the initially low forecasts are deliberate “sandbagging” – intentionally under-promising to overdeliver. That can hurt investors in the short term: A low forecast from one liner company can depress container stocks across the board.

Liner executives on conference calls maintain that it’s simply a matter of circumstance. In 2020-2023, no one knew how pandemic dynamics would affect profits; there was no playbook. In 2024, no one knows when the Red Sea will reopen, an event that will dramatically affect rates.

Uncertainty has led to a process of repeatedly upgrading guidance, as strong year-to-date results render initial forecasts outdated.

Multiple upgrades were commonplace in 2021 and 2022, and the same pattern is repeating this year. As Berra would say: “It’s déjà vu all over again.”

Here’s an overview of the guidance upgrades year to date, and a look back at how Covid-era results wildly diverged from initial outlooks:

Hapag-Lloyd

Germany’s Hapag-Lloyd upgraded its guidance for the second time this year on July 9.

Since its initial forecast in mid-March, the midpoint of its outlook range on earnings before interest, taxes, deprecation and amortisation has risen $1.5bn or 68%. Its guidance midpoint for earnings before interest and taxes has risen from zero to $1.7bn.

During the Covid era, Hapag-Lloyd did not provide full-year guidance in 2021 until mid-August. Even so, its 2021 ebit came in $1.6bn above the top end of the guidance range, and its ebitda was $1.6bn above the top end.

The following year, Hapag-Lloyd set its annual guidance in March – and profits turned out to be vastly higher than initially expected.

Its ebit in 2022 was $6.47bn higher or 54% above the top of the range announced in March. Ebitda was $6.47bn higher or 46% above the initially forecasted top end.

Zim

Israel’s Zim is the most closely watched liner stock among investors, with by far the largest trading volume.

On May 21, Zim hiked the midpoint of its full-year ebit guidance by $200m and the ebitda midpoint by same amount, an increase of 17%.

Hapag-Lloyd’s latest upgrade puts its internal outlook in line with the analyst consensus, but more hikes are expected from Zim.

Jefferies analyst Omar Nokta forecasts full-year ebit for Zim of $717m, $317m higher or 79% above the top end of the company’s latest forecast range. Nokta expects full-year ebitda of $1.74bn, $190m or 12% above Zim’s top end.

Zim went public in late January 2021. That year, its final results trounced initial guidance released in March. Its 2021 ebit came in at $5.82bn, 5.5 times higher than the top end of the March range. Ebitda came in at $6.6bn, quadruple original expectations.

Over the following two years, Zim’s guidance became much more reliable, with results coming in just above the top end of the range in 2022 and moderately below the bottom end in 2023.

Maersk

Maersk, the world’s second largest ocean carrier, upgraded its full-year guidance on June 3, the second hike since it released its initial outlook in early February.

Maersk has increased the midpoints of both its ebit and ebitda guidance by a whopping $4.5bn versus their original levels. As the beginning of this year, it was warning of a possible ebit loss of up to $5bn. Now, it sees the potential at the high end of the spectrum for an ebit gain of $3bn.

Looking back at the Covid era, Maersk missed the mark with its early forecasts – dramatically so – in both 2021 and 2022.

It posted ebit of $19.8bn in 2021, triple the top end of the range announced in February of that year. It posted an all-time high ebit of $30.9bn in 2022, 63% above the initial upper forecast.