) reported disappointing financial results for the second quarter
of 2012, which fell below the Zacks Consensus Estimates. The
company's legacy drybulk shipping cargo division and newly formed
tanker division continues their pathetic performances.
The drybulk shipping and oil tanker segments are suffering from
over supply of ships and tankers, which reduced spot rates
significantly. Ongoing macro-economic uncertainty of the European
region, slowdown of the Chinese industrial sector, volatility in
oil prices, and high leverage ratio are major near-term
Nevertheless, DryShips' majority owned deepwater oil drilling
Rig UDW Inc.
), is expected to boost the company's top line going forward.
Meanwhile, the stock price has dropped more than 35% in the last
year. We, thus, reiterate our long-term Neutral recommendation on
DryShips has a substantial portion of its fleet fixed under its
time charter contract, locking in sizeable cash flows that enhance
the stability of its earnings base. Management declared that 44% of
drybulk fleets are fixed at $27,400 per day for 2012. The company
continues with its fleet renewal and expansion strategy in the
drybulk sector, replacing older tonnage with newer and larger
We expect the ongoing strong demand for drybulk trade to
continue in the near future buoyed by healthy demand for iron ore
and coal from China. Growing production of steel and electricity in
China will sustain its import demand for iron ore and coal.
Currently, China accounts for 60% of global iron ore utilization
and facilitates around 35% of the global dry-bulk shipping trade.
Aprt from China, India has also become a major importer of drybulk
goods, such as coal. The demand for drybulk shipping will continue
to keep its momentum in 2012 mainly due to China and
DRYSHIPS INC (DRYS): Free Stock Analysis Report
OCEAN RIG UDW (ORIG): Free Stock Analysis
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