Deglobalization And Regulatory Burdens Will Depress Shipping Margins

Key Takeaways

• Shifting trade patterns, stricter regulations, and industry overcapacity are shrinking Maersk's core shipping market and compressing profitability despite efficiency efforts.
  
• Customer disintermediation and global instability threaten market share and introduce volatility to operations, challenging Maersk's transformation into a logistics integrator.
  
• Integrated logistics strategy, operational efficiency gains, and strong financial discipline position Maersk for stable profitability, reduced risk, and more diversified, resilient earnings growth.

Catalysts

Operates as an integrated logistics company in Denmark and internationally.

• The acceleration of deglobalization and increased nearshoring by manufacturers and shippers threaten to structurally shrink Maersk's addressable market for international containerized shipping, undermining long-term volume growth and putting sustained pressure on the company's core revenue base over the coming years.
  
• Intensifying regulatory requirements and environmental compliance costs for decarbonization-including enforcement of carbon taxes, emissions targets, and mandatory investments in alternative fuels-will drive persistent margin erosion as Maersk is forced to allocate substantial ongoing capital to fleet upgrades and compliance, limiting future profitability and free cash flow generation.
  
• Geopolitical instability, such as prolonged trade wars, regional conflicts, or sanctions, will continue to disrupt established trade lanes and heighten unpredictability in global demand and network flows, creating operational inefficiencies and greater earnings volatility, especially within the increasingly complex Ocean and Logistics segments.
  
• Rising industry-wide risk of oversupply, compounded by frequent vessel ordering during boom cycles and persistent overcapacity, will depress shipping rates in the long term, leading to ongoing price competition and commoditization that compresses Maersk's net margins despite operational improvements like Gemini.
  
• Increasing customer disintermediation, as large multinational shippers invest in their own logistics and alternative supply chain solutions, will erode Maersk's market share and revenue streams, further weakening organic growth prospects and undermining the company's transformation into an integrated end-to-end logistics provider.

A.P. Møller - Mærsk Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more pessimistic perspective on A.P. Møller - Mærsk compared to the consensus, based on a Fair Value that aligns with the bearish cohort of analysts.
• The bearish analysts are assuming A.P. Møller - Mærsk's revenue will decrease by 8.0% annually over the next 3 years.
• The bearish analysts are not forecasting that A.P. Møller - Mærsk will become profitable in next 3 years. To represent the Analyst Price Target as a Future PE Valuation we will estimate A.P. Møller - Mærsk's profit margin will increase from 12.1% to the average GB Shipping industry of 1.9% in 3 years.
• If A.P. Møller - Mærsk's profit margin were to converge on the industry average, you could expect earnings to reach $860.2 million (and earnings per share of $66.17) by about August 2028, down from $6.9 billion today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the price target of the more bearish analyst cohort, the company would need to trade at a PE ratio of 23.8x on those 2028 earnings, up from 4.9x today. This future PE is greater than the current PE for the GB Shipping industry at 6.9x.
• Analysts expect the number of shares outstanding to decline by 3.46% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 6.04%, as per the Simply Wall St company report.

A.P. Møller - Mærsk Future Earnings Per Share Growth

Risks

• Continued strong global container trade growth, particularly driven by China gaining international market share with its exports of EVs, renewables, and tech products, may support higher-than-expected long-term shipping volumes, bolstering Maersk's revenue and reducing negative pressure on future earnings.
  
• The successful implementation of the Gemini network is already delivering higher reliability and significant unit cost reductions through improved asset intensity, which can structurally enhance Maersk's net margins and support long-term profitability even in a challenging rate environment.
  
• Tight integration and synergy between Maersk's Ocean and Terminals businesses, alongside ongoing terminal investments and high utilization rates, have driven record high ROIC and EBIT margins in Terminals, providing a resilient and stable earnings base that reduces overall company risk.
  
• As Maersk accelerates transformation into an end-to-end logistics provider, logistics & services are showing margin improvement and steady expansion across regions outside North America, leading to more diversified, recurring, and potentially higher-quality revenue streams that can support future earnings growth.
  
• Maersk's strong capital discipline, robust balance sheet with substantial net cash, and capacity to both invest in growth and maintain share buybacks suggest ongoing support for shareholder returns and underpin long-term financial resilience, positively impacting free cash flow and investor confidence.

Valuation

• The assumed bearish price target for A.P. Møller - Mærsk is DKK8424.45, which represents the lowest price target estimate amongst analysts. This valuation is based on what can be assumed as the expectations of A.P. Møller - Mærsk's future earnings growth, profit margins and other risk factors from analysts on the more bearish end of the spectrum.
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of DKK15909.97, and the most bearish reporting a price target of just DKK8424.45.
• In order for you to agree with the bearish analysts, you'd need to believe that by 2028, revenues will be $44.2 billion, earnings will come to $860.2 million, and it would be trading on a PE ratio of 23.8x, assuming you use a discount rate of 6.0%.
• Given the current share price of DKK14095.0, the bearish analyst price target of DKK8424.45 is 67.3% lower.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.