We maintain our long-term Neutral recommendation on
Excel Maritime Carriers Ltd. ( EXM ). The company has
delayed its third and fourth quarter financial results of 2012.
Why Kept at Neutral?
The stock price of Excel Maritime has plummeted over 66% in the
last year and is currently trading at the low end of its 52-week
price range. With respect to several valuation metrics, Excel
Maritime is trading at significantly low multiples compared with
S&P 500 and the industry average. We believe that extremely low
level of valuation may limit further downslide of the stock price.
Excel Maritime currently has a Zacks Rank #3 (Hold).
Nevertheless, in our view this troublesome situationis mainly
attributed to the gloomy prospects of the drybulk shipping
industry. This sector continues to face serious challenges as the
spot vessel rates are now even lower than their levels during the
Risk/Reward Currently Balanced
Capesize vessels, which are mainly used for drybulk goods, faced
the major brunt of this competition. In the spot market, capesize
vessel rates fell below the operating costs. In contrast, the
capesize vessel rate was a massive $40,000 per day just a couple of
year ago when the economy was reeling under recession. We believe
that the continuation of the extremely low spot rate may also bring
down the fixed timecharter rates. This may severely impact the
overall finances of Excel Maritime.
Meanwhile, we expect the ongoing strong demand for drybulk trade
to continue in the near future buoyed by a 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. In addition to China, India has also become a major
importer of drybulk goods, such as coal.
Other Stocks to Consider
Other stocks to consider in the drybulk shipping industry
include Kirby Corp. ( KEX ), Tsakos
Energy Navigation Ltd. ( TNP ) and
DryShips Inc. ( DRYS ). While both
Kirby and Tsakos Energy currently carry a Zacks Rank #2 (Buy),
DryShips has a Zacks Rank #3 (Hold).DRYSHIPS INC (DRYS): Free Stock Analysis ReportEXCEL MARITIME (EXM): Free Stock Analysis
ReportKIRBY CORP (KEX): Free Stock Analysis ReportTo read this article on Zacks.com click here.Zacks Investment