We reaffirm our long-term Neutral recommendation on
). The company continues to suffer losses although its top line
improved significantly in the first quarter of 2013.
Why the Reiteration?
DryShips declared that it does not foresee any improvement in
the time charter rate for the rest of 2013. This is attributed to
the sluggish growth in China, the largest importer of coal and
steel in the world. Solid performance by the company's majority
Ocean Rig UDW Inc.
) deepwater oil drilling unit was more than offset by the tepid
results of its drybulk shipping cargo division and oil tanker
In 2013, both the drybulk shipping and the oil tanker
industries are facing severe challenges as the vessel rate
collapsed even below the rate during recession.
Meanwhile, DryShips is gradually transforming itself into an
ultra-deepwater drilling company rather than continuing as a
simple drybulk cargo operator. The offshore drilling division
continues to flourish buoyed by rising expenditures from oil
companies and success in ultra-deepwater oil field discoveries.
The deepwater oil drilling segment is currently witnessing
shortages of rigs throughout the world, as the energy companies
have raised the level of production.
We believe that the demand for deep water drilling services
will improve in the near future due to the discovery of several
big new deepwater oil reservoirs. Ocean Rig has several
high-quality drillship fleets, which will enable oil explorers to
operate even under harsh environment. Moreover, the stock price
plummeted nearly 35% in the last year. We believe DryShips is
currently fairly valued.
Other Stocks to Consider
DryShips currently has a Zacks Rank #3 (Hold). Other stocks in
the Shipping industry which are performing well include
Navios Maritime Holdings Inc.
Star Bulk Carriers Corp.
). Both these stocks currently have a Zacks Rank #1 (Strong
DRYSHIPS INC (DRYS): Free Stock Analysis
NAVIOS MARI HLD (NM): Free Stock Analysis
OCEAN RIG UDW (ORIG): Free Stock Analysis
STAR BULK CARRS (SBLK): Free Stock Analysis
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