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So far, the 2006 results for Tsakos Energy Navigation (NYSE:TNP) have been pretty outstanding, with revenues in the first and second quarters growing 25% and 50% over the 2005 results, respectively. The Greece-based crude and oil transport services company had a more maximal use of its fleet, at 96.8% over 94.6% in 2005, and the company expects the third and fourth quarters to be strong.

Tsakos did report higher costs of doing business: maintenance, insurance, and employee costs have been driving up its shipping expenses, and its growing fleet has led to greater depreciation and dry-dock amortization costs. The company has a fair amount of debt, and higher interest rates have made that more expensive as well, though the company says it has balanced these costs with interest rate swaps.

I’m not surprised, then, that this summer saw a large jump in the stock price, which went from around $35 in June to $47 in early September. Since then the stock has lost about 25% of its value and then gained some back, and it’s currently trading in the low $40s. I have to think the concerns about oil prices drove this stock down, but the strong results have kept the damage from being worse.

The outlook for Tsakos is strong. As the company points out, demand is growing for oil regardless of prices, and the countries with the fastest-growing demand are located far from supplies, which means shipping should continue. It expects a modest third quarter, which is in keeping with industry trends, but the fourth quarter should see another bounce as heating-oil shipments grow.

Just as I recommended Frontline (NYSE:FRO), whose numbers haven’t been great, I think this one is a winner. Results have been strong, estimates are good, and its relatively young fleet (average age of 6.4 years) should keep depreciation costs down as much as possible. My guess is we’ll see the price jump again as the results for the rest of the year are announced. TNP sold two tankers this year, and will see $30 million in cash flow and $12.5 million in capital gains reflected on its third-quarter results -- this will strengthen the normally lackluster quarter. And the likely jump in fourth-quarter revenues should boost the stock again. Plus, it has a nice dividend.

Type of stock: A large, profitable company with a 5% dividend yield that provides a service that will be in ever-increasing demand for the foreseeable future.

Price target:
TNP is currently trading at the higher end of its 52-week range, but still several dollars off its 52-week high. This seems to be the right entry point. You should especially keep an eye on the stock in the next month or so, as the third-quarter results should bring a nice pop.

TNP 1-yr Chart

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Source: Sailing Higher with Tsakos Energy Navigation