We are upgrading our recommendation on
) to Neutral based on the fact that the recent drop in fuel prices
will help the company to increase profitability in the near future.
The company's legacy drybulk shipping cargo division and newly
formed tanker division continues their pathetic performances.
However, DryShips' majority owned deepwater crude oil drilling unit
Rig UDW Inc.
), is expected to boost its top line.
DryShips reported mixed financial results for the first quarter
of 2012. Tough top line managed to beat the Zacks Consensus
Estimate, but net income fell significantly below it due to
downtime and relocation of oil rigs at the company's oil drilling
segment. Nevertheless, ongoing macro-economic uncertainty of the
European regions, slowdown of the Chinese industrial sector,
volatility in oil prices, and high leverage ratio are major
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 49% of
drybulk fleets are fixed at $31,249 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
Several industry researchers have predicted that the rates of
drybulk ships, particularly for the Panamax vessels, will increase
in late 2012. This was primarily due to growing demand for raw
materials in Japan, the largest importer of coal and the second
largest importer of iron ore, for generating power to rebuild its
nuclear facilities after the devastating earthquake and tsunami.
This will pull the rates for the drybulk cargos.
DRYSHIPS INC (DRYS): Free Stock Analysis Report
OCEAN RIG UDW (ORIG): Free Stock Analysis
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