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Genco Beats Views; Shares Rise

Stocks in this article: GNK BALT

NEW YORK ( TheStreet) -- Genco Shipping & Trading (GNK), which has gone on a fleet-expansion buying spree this year, steamed past Wall Street estimates with its second-quarter earnings, and investors bid up its stock in after-market action Monday.

Genco's sister company, meanwhile -- the freshly minted Baltic Trading -- which went public in March and only had three vessels in operation in the quarter, reported results after the close Monday that matched analysts' views. The company also declared a 16-cent dividend, and investors bid up Baltic stock sharply after the closing bell. In recent trades it had changed hands at $12.80, almost 9% higher than its regular-session close.

Baltic's premise is to put its entire fleet on the spot market, or charter the ships at rates that are tied to the movements of the Baltic Dry Index, which tracks spot rates. The company thus rides the roller coaster of global shipping rates much more than its peers, which generally prefer to lock up their ships into long-term contracts. Baltic then distributes to shareholders all the cash the ships throw off, less operating expenses and other maintenance costs that may arise. The company has since taken delivery of a few ships, and its fleet now totals six.

As for Genco, the company reported earnings of $36.8 million, or $1.16 a share, better than the $1.09 that analysts were expecting. On the top line, Genco reported revenue of $105.3 million, also topping the consensus target of about $103 million, according to Thomson Reuters.

A year ago, Genco earned $37.6 million, or $1.20 a share, on revenue of $93.7 million. The top-line increase, about 12% higher compared with a year ago, was the result of the company's fleet growth since the second quarter of 2009. During that time, Genco added eight ships.

The larger fleet also pushed operating expenses higher by $10 million ($50.4 million vs. $40.4 million a year ago), more than $6 million of which was due to amortization, which almost completely offset the revenue rise.

Meanwhile, the end of the second quarter saw day rates for most dry bulk vessels plunge to levels not seen since the pits of the financial crisis as demand weakened from China, the raw-materials-importing powerhouse that now essentially governs the world market for shipping, and as vessel supply surged.

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