Shipper Stays Profitable: Under the Radar

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BOSTON (TheStreet) -- The manufacturing and retail industries are showing signs of revival. As a result, dry-bulk shippers are getting some buzz. As shipping rates plummeted during the recession, investors aggressively sold the stocks. But hopes of a recovery are whetting their appetites.

The Baltic Dry Index, a gauge of worldwide shipping prices and demand, began a downward trend in June. It then flattened and began creeping up on Aug. 25. DryShips (DRYS), Navios Maritime (NM) and Excel Maritime (EXM) have since been getting more attention than usual.

But all three succumbed to quarterly net losses over the past year and receive "sell" ratings from our proprietary model. Here is a "buy"-rated shipper that retained profitability during the recession, trades at a discount to its peers and pays a fat dividend.

International Shipholding Corp. (ISH) isn't immune to the recession, but is faring better than its rivals. Second-quarter net income fell 41% to $11 million, but revenue climbed 63% to $100 million. Excluding a $15 million gain from the sale of a carrier in last year's second quarter, earnings rose almost four-fold.

The company's gross margin widened from 20% to 23%, and its operating margin stretched from 4% to 13%, helped by a 4% reduction in general and administrative expenses. The company has a diversified fleet of carriers, including eight car/truck carriers that transport Honda (HMC), Hyundai and Toyota (TM) automobiles.

The balance sheet is reassuring. International Shipholding increased its cash balance 242% to $70 million since the year-earlier period. A quick ratio of 2.2 demonstrates ample liquidity. Just $139 million of debt and a debt-to-equity ratio of 0.6 indicate conservative leverage.

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