Genco (GNK)

Maritime shipping company Genco (NYSE:GNK) reported Q1 CY2025 results topping the market’s revenue expectations, but sales fell by 9.9% year on year to $71.27 million. Its non-GAAP loss of $0.28 per share was in line with analysts’ consensus estimates.

Company Overview

Headquartered in NYC, Genco (NYSE:GNK) is a shipping company that transports dry bulk cargo along worldwide maritime routes.

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 in the maritime transportation industry include Diana Shipping (NYSE:DSX), Eagle Bulk Shipping (NASDAQ:EGLE), and Safe Bulkers (NYSE:SB)

A company’s long-term performance is an indicator of its overall quality. Any business can have short-term success, but a top-tier one grows for years. Unfortunately, Genco’s 5.8% annualized revenue growth over the last five years was tepid. This fell short of our benchmark for the industrials sector and is a poor baseline for our analysis.

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. Genco’s performance shows it grew in the past but relinquished its gains over the last two years, as its revenue fell by 7.6% annually. Genco 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.

We can dig further into the company’s revenue dynamics by analyzing its number of owned vessels, which reached 42 in the latest quarter. Over the last two years, Genco’s owned vessels averaged 3.7% year-on-year growth. Because this number is higher than its revenue growth during the same period, we can see the company’s monetization has fallen.

This quarter, Genco’s revenue fell by 9.9% year on year to $71.27 million but beat Wall Street’s estimates by 68.5%.

Looking ahead, sell-side analysts expect revenue to decline by 10.1% over the next 12 months, a slight deceleration versus the last two years. This projection doesn't excite us and implies its products and services will see some demand headwinds.

Genco 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 61.5% gross margin over the last five years. That means Genco only paid its suppliers $38.51 for every $100 in revenue.

This quarter, Genco’s gross profit margin was 26.7%, down 36.1 percentage points year on year. Genco’s full-year margin has also been trending down over the past 12 months, decreasing by 5.3 percentage points. If this move continues, it could suggest deteriorating pricing power and higher input costs (such as raw materials and manufacturing expenses).

Operating margin is an important measure of profitability as it shows the portion of revenue left after accounting for all core expenses – everything from the cost of goods sold to advertising and wages. It’s also useful for comparing profitability across companies with different levels of debt and tax rates because it excludes interest and taxes.

Genco 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 22.9%. This result isn’t surprising as its high gross margin gives it a favorable starting point.

Analyzing the trend in its profitability, Genco’s operating margin rose by 61.1 percentage points over the last five years, as its sales growth gave it operating leverage.

In Q1, Genco generated an operating profit margin of negative 13.7%, down 41.6 percentage points year on year. Since Genco’s operating margin decreased more than its gross margin, we can assume it was less efficient because expenses such as marketing, R&D, and administrative overhead increased.

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.

Genco’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.

Like with revenue, we analyze EPS over a shorter period to see if we are missing a change in the business.

Sadly for Genco, its EPS declined by more than its revenue over the last two years, dropping 45.3%. This tells us the company struggled to adjust to shrinking demand.

Diving into the nuances of Genco’s earnings can give us a better understanding of its performance. Genco’s operating margin has declined by 21.7 percentage points over the last two years. This was the most relevant factor (aside from the revenue impact) behind its lower earnings; taxes and interest expenses can also affect EPS but don’t tell us as much about a company’s fundamentals.

In Q1, Genco reported EPS at negative $0.28, down from $0.46 in the same quarter last year. This print was close to analysts’ estimates. Over the next 12 months, Wall Street expects Genco’s full-year EPS of $0.84 to shrink by 22.2%.

Although earnings are undoubtedly valuable for assessing company performance, we believe cash is king because you can’t use accounting profits to pay the bills.

Genco 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 22.6% over the last five years.

Taking a step back, we can see that Genco’s margin dropped by 7.6 percentage points during that time. It may have ticked higher more recently, but shareholders are likely hoping for its margin to at least revert to its historical level. If the longer-term trend returns, it could signal increasing investment needs and capital intensity.

Genco broke even from a free cash flow perspective in Q1. The company’s cash profitability regressed as it was 40.1 percentage points lower than in the same quarter last year, suggesting its historical struggles have dragged on.

Genco reported $30.24 million of cash and $89.19 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 $117.3 million of EBITDA over the last 12 months, we view Genco’s 0.5× net-debt-to-EBITDA ratio as safe. We also see its $4.92 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 Genco blew past analysts’ revenue forecasts this quarter. We were also happy its EBITDA topped Wall Street’s estimates, but we would have expected a bigger profit beat given the massive top-line outperformance. Nevertheless, we think this was a solid quarter with some key areas of upside. The stock traded up 1.8% to $13.70 immediately after reporting.

Updated: June 14, 2025 at 11:47 PM EDT

Are you wondering whether to buy Genco or pass? We urge investors to not only consider the latest earnings results but also longer-term business quality and valuation as well.

We see the value of companies helping their customers, but in the case of Genco, we’re out. For starters, its revenue growth was uninspiring over the last five years, and analysts expect its demand to deteriorate over the next 12 months. And while its admirable gross margins indicate the mission-critical nature of its offerings, the downside is its projected EPS for the next year is lacking. On top of that, its cash profitability fell over the last five years.

Genco’s P/E ratio based on the next 12 months is 21.6x. This valuation is reasonable, but the company’s shaky fundamentals present too much downside risk. There are better investments elsewhere.

Wall Street analysts have a consensus one-year price target of $19.79 on the company (compared to the current share price of $14.13).

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.