Smooth Sailing for Shipping Stocks - Analyst Blog

By David Bartosiak,

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A few years ago, as Crude Oil climbed to all-time highs, investors were turned on to an obscure index shipping companies use on a daily basis. The Baltic Dry Index showed up in the news along with dry bulk shipping companies skyrocketing to new highs.    

The index is a daily average of the cost to ship raw materials in bulk across oceans and seas. Really, it's a measure of demand for shipping against a relatively static supply of cargo vessels. An increase in the index implies a rise in economic activity, as raw materials are the building blocks of
manufacturing and construction. So the index is seen as a leading indicator, as opposed to all those lagging indicators like GDP and Non-Farm Payrolls we pay so much attention to.

Last year the index tripled, and after an aggressive pull back in January is still 50% higher than the start of 2013. This has a direct impact on the dry bulk shippers. A higher index translates to higher revenues for shipping companies. We have seen analysts revise their estimates on a number of stocks in anticipation of higher fees.

Paragon Shipping ( PRGN ) is an international shipping company whose carriers predominantly carry coal and iron ore for energy and steel production. The last EPS Surprise of 89.74% encouraged analysts to take a more bullish stance on the stock and helped it gain a Zacks #1 ranking. Well off the 52-week high at $9.40 the stock has plenty of upside potential.

Genco Shipping & Trading ( GNK ) transports iron ore, coal, grain and steel products along worldwide shipping routes. With a Qtr Earnings ESP of 54.90%, this stock could rally sharply after it announces earnings on February 19th. However, CFO John C. Wobensmith reminded investors back in November that first quarter is seasonally weak for the company so investors should take measures to manage their risk.

Once the Belle of the Ball, DryShips ( DRYS ) stock has fallen from its all-time high over $130 down below $5 where it sits today. With a newly established Zacks #2 ranking, the stock looks to rebound as the Baltic Dry Index retraces its recent drop. Over the last 60 days analysts have revised earnings estimates upwards for the current quarter, current year, next quarter and next year. At $3.36 today, DRYS sits comfortably above its 200 Moving Average at $2.70, giving it a bullish technical bias.   

DRYSHIPS INC (DRYS): Free Stock Analysis Report

GENCO SHPG&TRDG (GNK): Free Stock Analysis Report

PARAGON SHIPPNG (PRGN): Free Stock Analysis Report

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Zacks Investment Research

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

This article appears in: Investing , Business , Stocks
Referenced Stocks: DRYS , GNK , PRGN

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