Feb. 24: Dry-Bulk Companies Report Mixed Fourth-Quarter Results; Outlook Stormy
Genco Shipping & Trading, which has more of its fleet exposed to the depressed spot market than any of its peers, missed Wall Street expectations for its fourth quarter when it reported on Feb. 23, but its stock spiked higher by nearly 7% in the subsequent trading day.
According to one analyst who participated in the company's conference call to discuss fourth-quarter results, Genco management did a good job ameliorating investors and analysts by indicating that the company will generate substantial cash this year, despite a severe decline in rates for the largest dry-bulk ships.Genco shares have been heavily shorted. As of Jan. 31, short positions amounted to 17.5% of its float, the highest of any dry-bulk shipper. Short covering may partly have explained the severity of the share price rise after the company's conference call. Genco also said it would stick to its current strategy of engaging its ships under short-term contracts in hopes of a rebound in the market for ocean-going commodities transport. On the spot market, dry-bulk freight rates have been severely depressed since the beginning of the year. The company's results marked a mixed earnings season for the dry-bulk trade. Genco rival Diana Shipping (DSX - Get Report) reported a 17% rise in profit from a year ago, but the company offered little in the way of outlook as the dry bulk industry faces one of its worst markets in years. Beyond the numbers, analysts continued praising the conservative Diana and its long-range strategy. Credit Suisse analyst Greg Lewis said in a note to clients Feb. 22 that the company would use the downtrodden market for dry-bulk ships to expand its fleet by buying up vessels on the cheap. Meanwhile, Excel Maritime (EXM - Get Report) appeared to meet Wall Street estimates for its fourth quarter, but its stock slid sharply after the results were released. Excel tried to reassure investors that an industry-wide glut of newly delivered dry-bulk vessels, which has served to depress spot-market shipping rates so far this year, wouldn't sting its bottom line. "While we expect that deliveries of new vessels in 2011 will cause some volatility in freight rates, we remain cautiously optimistic in the dry bulk market outlook based on emerging markets being the principal drivers of growth," said Excel's Chief Financial Officer Pavlos Kanellopoulos in a prepared statement.