Maersk suspends share buybacks on Red Sea uncertainty

Shares of Danish shipping titan Maersk (MAERSK-B.CO, AMKBY) tumble Thursday morning after the company halted share buybacks and issued a muted 2024 outlook. Maersk pointed to threats to vessel routing through the Red Sea as justification to pause repurchases and adopt a cautious forecast.

Yahoo Finance's Seana Smith and Brad Smith break down the details.

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Editor's note: This article was written by Angel Smith

Video transcript

BRAD SMITH: Shares of Maersk plummeting after announcing it's suspending its share buybacks. The shipping giant also highlighting high uncertainty over Red Sea disruptions in its 2024 earnings outlook. Take a look at shares, they are down 17% right now here. And as we continue to track the kind of not full downfall, but the ultimate action that continues to take place in the Red Sea, Maersk and some of the supply chain management companies, the most immediately impacted in the wake of this too.

SEANA SMITH: Yeah, I mean, it just shows that the pressure that the industry as a whole is under right now, given that uncertainty, given the limited transparency that we do have just in terms of how long this issue could potentially stand. And this is something that Maersk pointed to in the report here this morning, saying that they have very little visibility as to whether this is a situation that's going to resolve in a matter of weeks or if it's a matter of months or something that is going to be with them there and the rest of their competitors for the rest of the year.

So given that, they've had to make these certain tough adjustments right now, suspending their share buyback program, giving that cautious outlook amid the disruption. You talk about the impact that this has had on freight rates right now, exactly how long that is going to hold is another overhang here for the industry. Limited visibility into that as well.

So we're seeing that reflected in the stock price today, with shares under a tremendous amount of pressure. But again, lots of questions just about how long this issue is going to be a challenge here for Maersk and rivals.

BRAD SMITH: Yeah, absolutely. Tracking shares here. Again, still down 17%. You're right to call out that buyback program and then additionally, that ocean results segment here within some of the Q4 highlights, that's where you could perhaps look in and get that read through from the Red Sea part. The results turn negative in Q4, in line with the expectations that they mentioned and just summarized it's a challenging market development as well.