On March 20, 2014, we issued an updated research report on
). The drybulk shipping rates and ship values have improved
considerably in recent times and management is expecting the
trend to continue in 2014 mainly buoyed by increasing demand for
dry bulk commodities globally.
DryShips delivered an average negative earnings surprise of
83.33% in all the four quarters last year. The company reported
mixed financial results for the fourth quarter of fiscal 2013
with the bottom line missing the Zacks Consensus Estimate but the
top line beating the same.
DryShips is gradually transforming itself into an ultra-deepwater
drilling company rather than continuing as a simple drybulk cargo
operator. The acquisition of Ocean Rig turned out to be a major
positive. Ocean Rig's asset and contract portfolio diversified
DryShips' assets and sources of cash flow.
The offshore drilling division continues to flourish buoyed by
rising expenditure from oil companies and success in
ultra-deepwater oil field discoveries. The deepwater oil drilling
segment is currently witnessing rig shortage throughout the
world, as energy companies have raised the level of production.
Despite an improving U.S. macroeconomic scenario, the drybulk
shipping industry is still not out of the woods. This is solely
attributable to non-economic decisions taken by the shipping
companies in 2008, just before the onset of worldwide recession.
The sheer increase of vessels under operation resulted in intense
price competition. Most of the vessel operators had ordered large
number of newbuild ships in several docks due to the lack of
near-term foresight. The glut of ships resulted in severe
cut-throat price competition.
The main problem for DryShips is that a major portion of its
shipping contracts are currently under volatile spot rate market.
Such a wide exposure will definitely result in severe top-line
fluctuations, going forward.
The drybulk shipping industry is cyclical in nature with
volatility in charter hire rates and profitability. Future demand
and supply of drybulk commodities are very difficult to predict.
Several economic and geopolitical events can significantly affect
demand, supply, price, and transportation of drybulk commodities
within a short span of time. As a result, drybulk shipping rates
will also become volatile.
DryShips currently has a Zacks Rank #3 (Hold).
Stocks That Warrant a Look
Other better-ranked stocks in the shipping industry are
Eagle Bulk Shipping, Inc.
Genco Shipping & Trading Ltd.
). All three stocks currently sport a Zacks Rank #2 (Buy).
DRYSHIPS INC (DRYS): Free Stock Analysis
EAGLE BULK SHPG (EGLE): Free Stock Analysis
FRONTLINE LTD (FRO): Free Stock Analysis
GENCO SHPG&TRDG (GNK): Free Stock Analysis
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