International Seaways: profit up 4.8x on record freight rates, but multiples already above its own history

On August 10, International Seaways released its second-quarter 2026 results. Revenue rose 138.8% year on year to $467.3 million, adjusted EBITDA by 208.0% to $345.2 million, and net income by 378.4% to $294.9 million. The company declared a record quarterly dividend of $5.05 per share and has kept its payout at no less than 85% of adjusted net income for a third consecutive quarter. At a share price of about $104 and an LTM EV/EBITDA of 5.82 versus a three-year average of 4.37, the stock looks rather attractive on a 12.2% dividend yield, but the multiple is already above its own history, which limits upside.

Key takeaways

— Revenue rose 138.8% year on year, and almost all of the increase came from spot freight rates

— The 73.0% EBITDA margin is a record, but it rests on rates, not on cost cuts

— Net income of $294.9 million includes one-off items; without them the result is more modest

— Free cash flow of $260.7 million is a record, but it was financed by rising debt

— The $5.05 per share dividend is a record, and $12.61 per share was paid over 12 months

— EV/EBITDA of 5.82 is above the three-year average of 4.37 – the market already prices in sustained high rates

Attractiveness

Key figures, USD bn

Revenue rose 138.8% year on year, and almost all of the increase came from spot freight rates

Revenue in the second quarter of 2026 was $467.3 million versus $195.6 million a year earlier. The 138.8% increase is the highest in recent quarters: in the first quarter of 2026 it was 77.5%, while in the fourth quarter of 2025 revenue declined 12.8% year on year. The turning point came in early 2026, when freight rates surged.

Almost all of the increase came from spot rates. In the Crude Tankers segment, revenue rose to $285 million from $104 million, and TCE revenue to $253 million from $99 million. Average spot earnings on crude tankers exceeded $64,500 per day, and on product tankers $42,600 per day. A year earlier these rates were several times lower.

The Product Carriers segment posted revenue of $182 million versus $92 million a year earlier, with TCE revenue of $181 million versus $90 million. Growth here came from spot rates on MR tankers – $60,342 per day versus $18,941 a year earlier. Panamax (LR1) generated $79,180 per day in spot rates versus $32,802 a year earlier.

Total revenue days fell to 5,446 from 6,570 a year earlier – the fleet shrank after the sale of seven older vessels in the first quarter of 2026. So revenue growth came not from more voyages but solely from rates. This makes the result sensitive to any reversal in the freight market.

The 73.0% EBITDA margin is a record, but it rests on rates, not on cost cuts

The EBITDA margin in the second quarter of 2026 reached 73.0% versus 56.6% a year earlier. This is the highest level in the company's history. The 16.4 percentage point increase came with almost unchanged operating costs: vessel expenses fell to $63.6 million from $67.4 million, and depreciation and amortization to $39.7 million from $41.3 million.

The main driver of the margin was not cost control but revenue growth. With revenue of $467.3 million and EBITDA of $345.2 million, operating expenses were $168.4 million, of which $33.1 million was voyage expenses, $63.6 million vessel expenses, and $15.2 million charter hire. These items were almost unchanged year on year, so the entire revenue increase flowed through to EBITDA.

The net margin rose to 63.1% from 31.5% a year earlier. Such a margin level is unusual for the tanker business and reflects exceptionally favorable market conditions. In previous quarters, when rates were lower, the margin was far more modest: for example, in the third quarter of 2025 the EBITDA margin was around 61%, and in the first quarter of 2025 around 54%.

Sustaining a margin above 70% is unlikely if freight rates return to average levels. The company does not provide margin guidance, but the cost structure does not allow for further significant cost reductions – there is almost no room left to boost the margin through savings.

Net income of $294.9 million includes one-off items; without them the result is more modest

Net income in the second quarter of 2026 was $294.9 million, or $5.91 per diluted share, versus $61.6 million, or $1.25 per share, a year earlier. The 4.8x increase looks impressive, but the financial statements contain one-off items that distort the picture.

In the first quarter of 2026, the company sold seven older vessels – five MRs and two VLCCs – for $216 million and recognized a gain of $88 million. That gain is included in the income statement for the first half of 2026 but not in the second quarter. In addition, in the first quarter of 2026 the company recognized a one-off gain of $3.9 million from the revaluation of its previously held equity interest in Tankers International.

In the second quarter of 2026 there were almost no one-off items: the loss on vessel disposals was only $43 thousand. Adjusted net income was therefore virtually equal to net income – $295.0 million. So the second-quarter result is operating profit, not an effect of asset sales.

Nevertheless, for the first half of 2026 net income was $581.1 million, of which $88.1 million was gain on vessel sales. Without that one-off item, half-year profit would have been $493.0 million. For assessing the sustainability of the business, the second quarter is more important, as it contains almost no one-off factors.

Free cash flow of $260.7 million is a record, but it was financed by rising debt

Free cash flow in the second quarter of 2026 reached $260.7 million – a record quarterly figure, nearly $100 million above the previous high. Operating cash flow was $267.7 million versus $85.8 million a year earlier. The growth in operating cash flow is explained by high profit and lower drydocking payments.

However, free cash flow would have been lower had the company not raised additional financing. In the first half of 2026, the company drew $85.2 million under a non-revolving credit facility and $30.5 million under revolving credit facilities, while repaying $22.0 million on revolving facilities and $10.7 million on sale and leaseback. Net financing inflow was about $83 million.

The company's debt increased: long-term debt as of June 30, 2026 was $606.4 million versus $541.3 million at the end of 2025, and the current portion was $39.2 million versus $25.8 million. Total debt thus rose by about $78.5 million. Net debt, including cash and short-term investments, was $459.3 million.

The net debt to EBITDA LTM ratio is 0.48. This is a low level, but it cannot be compared with a previous value because the facts do not contain an earlier figure. The company maintains high liquidity: $409 million in cash and short-term investments and $526 million in undrawn credit lines. Interest expense for the quarter was $10.6 million – small relative to EBITDA.

The $5.05 per share dividend is a record, and $12.61 per share was paid over 12 months

The board declared a quarterly dividend of $5.05 per share – the largest in the company's history. Payment will be made on September 24, 2026 to shareholders of record on September 10. This is the third consecutive quarter in which the company allocates at least 85% of adjusted net income to dividends.

Over the past 12 months, the company paid dividends of $12.61 per share, which at the current price of about $104 gives a yield of 12.2%. This is significantly higher than the yield on US Treasuries, although a direct comparison with the Russian key rate is not appropriate here. In June 2026, the company already paid $4.55 per share, and for the first half – $6.70.

Our estimate for the 2026 dividend assumes the payout ratio remains at 85% of adjusted net income. If second-half profit stays at the second-quarter level, the annual dividend could be around $20 per share, implying a yield of about 19% to the current price. However, this depends on freight rates: if they fall, profit and therefore the dividend will shrink.

The dividend could be smaller if the company increases capital expenditure. In 2026, it ordered four new LR1 tankers for $244 million with delivery in 2028 and expects two more vessels to be delivered in the third quarter of 2026. Financing of the new vessels will come from long-term financing and available liquidity, which may limit free cash flow available for dividends.

EV/EBITDA of 5.82 is above the three-year average of 4.37 – the market already prices in sustained high rates

The current EV/EBITDA LTM is 5.82, above the three-year average of 4.37. This means the market values the company more expensively than its average over the past three years, despite record profits. The P/E LTM is 6.61 – a low level, but it reflects peak earnings that may prove unsustainable.

The multiple expansion is explained by the market already pricing in sustained high freight rates. If rates remain at current levels, profit and EBITDA will stay high, and the multiple will prove justified. If rates return to average levels, EBITDA could fall several-fold, and the current valuation would look inflated.

For comparison: in previous periods, when rates were lower, EV/EBITDA was around 4.4. The current 33% premium to the three-year average suggests the market demands a growth premium, but that premium may not be justified if the cycle turns.

A dividend yield of 12.2% with an 85% payout ratio looks attractive, but it depends directly on profit. If profit falls, the dividend will be cut, and the yield will no longer be as high. Therefore, the company's valuation must account for the cyclicality of the tanker market.

Valuation on the latest reported figures

Bottom line

International Seaways delivered a record quarter: revenue up 138.8%, EBITDA up 208.0%, net income up 378.4%. However, this result is almost entirely driven by spot freight rates, which are at historically high levels. There were almost no one-off items in the second quarter, which makes the profit high-quality, but its sustainability depends on the market. The $5.05 per share dividend and 12.2% yield look attractive, but an 85% payout ratio means the dividend will be cut if rates fall. EV/EBITDA of 5.82 is above the three-year average of 4.37 – the market already prices in sustained high rates. Verdict: the stock is rather attractive for income-oriented investors, but with cyclical risk and a premium to its own history.