On May 30, 2014, Zacks Investment Research downgraded
) to a Zacks Rank #5 (Strong Sell).
Why the Downgrade?
DryShips witnessed sharp downward estimate revisions following
lower-than-expected first-quarter 2014 results reported on May
22. The company posted total revenue of $457.5 million that
lagged the Zacks Consensus Estimate of $489 million, while
delivered loss per share of 4 cents, against the Zacks Consensus
Estimate of a profit of 2 cents.
As a result, we have been witnessing a downtrend in the Zacks
Consensus Estimate. For the current year, the Zacks Consensus
Estimate has plunged 35% to 13 cents per share whereas for the
current quarter, the same declined 25% to 3 cents in the last 7
days. Notably, the company has missed the Zacks Consensus Estimate
in all of the last four quarters, with a substantial average miss
Despite an improving U.S. macroeconomic scenario, the drybulk
shipping industry is still not out of the woods. This is solely
attributable to non-economical decisions taken by the shipping
companies in 2008, just before the onset of recession
The increase in the number of vessels under operation resulted
in intense price competition. Due to the lack of near-term
foresight, most of the vessel operators had ordered large number of
new build ships in several docks. This abundance of vessels
resulted in severe cut-throat price competition.
The main problem for DryShips is that a major portion of its
shipping contracts are currently under volatile spot rate market.
Such a wide exposure will definitely result in severe top-line
fluctuations, going forward.
Other Stocks to Consider
While we choose to avoid DryShips at the moment, better-ranked
stocks worth considering in the shipping industry include
Global Ship Lease, Inc.
Nordic American Tankers Ltd.
). All the three stocks carry a Zacks Rank #2 (Buy).
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