Scorpio Tankers (STNG)

Tanking company Scorpio Tankers (NYSE:STNG) announced better-than-expected revenue in Q3 CY2025, but sales fell by 6.5% year on year to $241.4 million. Its GAAP profit of $1.73 per share was 23.4% above analysts’ consensus estimates.

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.

The growth of e-commerce and global trade continues to drive demand for shipping services, presenting opportunities for marine transportation companies. While ocean freight is more fuel efficient and therefore cheaper than its air and ground counterparts, it results in slower delivery times, presenting a trade off. To improve transit speeds, the industry continues to invest in digitization to optimize fleets and routes. However, marine transportation companies are still at the whim of economic cycles. Consumer spending, for example, can greatly impact the demand for these companies’ offerings while fuel costs can influence profit margins. Geopolitical tensions can also affect access to trade routes, and if certain countries are banned from using passageways like the Panama Canal, costs can spiral out of control.

Competitors of Scorpio Tankers include Teekay Tankers (NYSE:TNK), Frontline (NYSE:FRO), and Euronav NV (NYSE:EURN).

A company’s long-term sales performance can indicate its overall quality. Any business can experience short-term success, but top-performing ones enjoy sustained growth for years. Scorpio Tankers struggled to consistently generate demand over the last five years as its sales dropped at a 2.7% annual rate. This was below our standards and suggests it’s a lower quality business.

We at StockStory place the most emphasis on long-term growth, but within industrials, a half-decade historical view may miss cycles, industry trends, or a company capitalizing on catalysts such as a new contract win or a successful product line. Scorpio Tankers’s recent performance shows its demand remained suppressed as its revenue has declined by 23.1% annually over the last two years. 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.

This quarter, Scorpio Tankers’s revenue fell by 6.5% year on year to $241.4 million but beat Wall Street’s estimates by 3.8%.

Looking ahead, sell-side analysts expect revenue to grow 13.9% over the next 12 months, an improvement versus the last two years. This projection is admirable and indicates its newer products and services will catalyze better top-line performance.

All else equal, we prefer higher gross margins because they make it easier to generate more operating profits and indicate that a company commands pricing power by offering more differentiated products.

Scorpio Tankers has best-in-class unit economics for an industrials company, enabling it to invest in areas such as research and development. Its margin also signals it sells differentiated products, not commodities. As you can see below, it averaged an elite 67.2% gross margin over the last five years. That means Scorpio Tankers only paid its suppliers $32.79 for every $100 in revenue.

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%. 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 60.1 percentage points over the last five years. Its expansion was impressive, especially when considering the cycle turned in the wrong direction and most of its Marine Transportation peers observed plummeting revenue and margins.

In Q3, Scorpio Tankers generated an operating margin profit margin of 34.2%, down 32 percentage points year on year. The contraction shows it was less efficient because its expenses increased relative to its revenue.

We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.

Scorpio Tankers’s EPS grew at a spectacular 15% compounded annual growth rate over the last five years, higher than its 2.7% annualized revenue declines. This tells us management adapted its cost structure in response to a challenging demand environment.

We can take a deeper look into Scorpio Tankers’s earnings quality to better understand the drivers of its performance. As we mentioned earlier, Scorpio Tankers’s operating margin declined this quarter but expanded by 60.1 percentage points over the last five years. Its share count also shrank by 11.1%, and these factors together are positive signs for shareholders because improving profitability and share buybacks turbocharge EPS growth relative to revenue growth.

Like with revenue, we analyze EPS over a more recent period because it can provide insight into an emerging theme or development for the business.

For Scorpio Tankers, its two-year annual EPS declines of 29.6% mark a reversal from its (seemingly) healthy five-year trend. We hope Scorpio Tankers can return to earnings growth in the future.

In Q3, Scorpio Tankers reported EPS of $1.73, down from $3.16 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 $5.91 to grow 4.8%.

Free cash flow isn't a prominently featured metric in company financials and earnings releases, but we think it's telling because it accounts for all operating and capital expenses, making it tough to manipulate. Cash is king.

Scorpio Tankers has shown terrific cash profitability, putting it in an advantageous position to invest in new products, return capital to investors, and consolidate the market during industry downturns. The company’s free cash flow margin was among the best in the industrials sector, averaging an eye-popping 48.5% over the last five years.

Taking a step back, we can see that Scorpio Tankers’s margin expanded by 34.1 percentage points during that time. This is encouraging because it gives the company more optionality.

Scorpio Tankers’s free cash flow clocked in at $115.3 million in Q3, equivalent to a 47.8% margin. The company’s cash profitability regressed as it was 24.8 percentage points lower than in the same quarter last year, prompting us to pay closer attention. Short-term fluctuations typically aren’t a big deal because investment needs can be seasonal, but we’ll be watching to see if the trend extrapolates into future quarters.

Scorpio Tankers reported $603.2 million of cash and $884.4 million of debt on its balance sheet in the most recent quarter. As investors in high-quality companies, we primarily focus on two things: 1) that a company’s debt level isn’t too high and 2) that its interest payments are not excessively burdening the business.

With $521.5 million of EBITDA over the last 12 months, we view Scorpio Tankers’s 0.5× net-debt-to-EBITDA ratio as safe. We also see its $106.7 million of annual interest expenses as appropriate. The company’s profits give it plenty of breathing room, allowing it to continue investing in growth initiatives.

We were impressed by how significantly Scorpio Tankers blew past analysts’ EBITDA expectations this quarter. We were also excited its revenue outperformed Wall Street’s estimates by a wide margin. Zooming out, we think this was a solid print. The stock traded up 1.5% to $63 immediately following the results.

Updated: December 4, 2025 at 10:46 PM EST

We think that the latest earnings result is only one piece of the bigger puzzle. If you’re deciding whether to own Scorpio Tankers, you should also grasp the company’s longer-term business quality and valuation.

Scorpio Tankers isn’t a terrible business, but it isn’t one of our picks. To begin with, its revenue has declined over the last five years. And while Scorpio Tankers’s admirable gross margins indicate the mission-critical nature of its offerings, its unimpressive EPS growth over the last five years shows it’s failed to produce meaningful profits for shareholders.

Scorpio Tankers’s P/E ratio based on the next 12 months is 9.5x. While this valuation is optically cheap, the potential downside is big given its shaky fundamentals. We're pretty confident there are more exciting stocks to buy at the moment.

Wall Street analysts have a consensus one-year price target of $73.33 on the company (compared to the current share price of $56.73).

Although the price target is bullish, readers should exercise caution because analysts tend to be overly optimistic. The firms they work for, often big banks, have relationships with companies that extend into fundraising, M&A advisory, and other rewarding business lines. As a result, they typically hesitate to say bad things for fear they will lose out. We at StockStory do not suffer from such conflicts of interest, so we’ll always tell it like it is.