A leading global seaborne energy transportation company,
Overseas Shipholding Group Inc.
) recorded mixed financial results for the second quarter of 2012.
The company reported losses for thirteen consecutive quarters.
However, the top line surpassed the Zacks Consensus Estimate
followed by a year-over-year increase in revenue.
Overseas Shipholding maintains a diverse fleet and a balanced
mix of spot and time-charter contracts. The company has taken quite
a number of steps to increase the size of its fleet, including
several acquisitions. More importantly, it has significantly
increased the diversity of its fleet, making its revenue stream
less dependent on the inherently volatile spot market.
A major positive for Overseas Shipholding is that it owns the
industry's most sophisticated and latest technology driven fleet.
Moreover, increased demand for liquefied natural gas coupled with
growing U.S. and the European economies will further accelerate the
demand for LNG tankers.
On the downside, the shipping industry is highly competitive and
fragmented. Overseas Shipholding is facing stiff competition from
international flag tankers like
Recently, Standard & Poor's Rating Services (S&P)
downgraded the long-term corporate rating of Overseas Shipholding
to "CCC+" from "B-" with a negative outlook. The primary concern
for S&P is that the continuously falling oil tanker rates may
place the company in a financial crunch when its massive $1.5
billion of evolving credit facility will mature in February
Moreover, continuous decline of Overseas Shipholding's spot rate
may continue to hamper its EPS thereby acting as a headwind for the
company going forward. We, thus maintain our long-term Neutral
recommendation on Overseas Shipholding.
Currently, it has a Zacks #3 Rank, implying a short-term Hold
rating on the stock.
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