Dry Bulk Winners & Losers: Euroseas

NEW YORK ( TheStreet) -- Dry-bulk shipping stocks, suddenly ensign to the white-hot tanker sector's admiral, were mostly lower Friday, retreating from strong gains notched since the beginning of the year.

Spot rates for capesize ships, the largest haulers of dry-bulk cargoes on the Seven Seas, jumped above $42,000 a day Friday, according to the Baltic Exchange, the London shipbroker.

Friday was also evidently a busy day Down Under. Australian iron-ore giant BHP Billiton ( BHP) hired four capesize vessels for journeys to (where else?) China, paying between $12.50 and $12.75 per ton. That's up from the previous going rate of about $12 to $12.50.

Back in the Northern Hemisphere, sell-side analyst Scott Burk of Oppenheimer & Co. released his 2010 shipping preview Friday. Countering the recent trend, Burk favors the shares of dry-bulk shippers to their wet-cargo cousins, at least over the short term.

Tanker stocks have grown overheated, he says, while dry carriers stand to benefit from (who else?) China. The world's largest importer of iron ore will likely need to pay as much as 50% more for that crucial steel ingredient when it eventually strikes its annual contract with mining companies in April.

In the meantime, China will want to take advantage of relatively cheap iron ore prices, stocking up before the coming hike. Dry-bulk shippers, thus, will likely keep plenty busy between now and springtime, Burk says, moving ore to the People's Republic.

The analysts' 2010 preview contained a few other nuggets, including a downgrade of Euroseas' ( ESEA) stock to perform from outperform. Perhaps as a result, shares of the Maroussi, Greece-based shipping concern fell as much as 5.8% Friday, leading the decliners. (Maroussi is a leafy suburb of Athens.)

Burk thinks Euroseas shares -- and most shipping stocks for that matter, whether dry-bulk or tanker -- have advanced too much too fast. (Euroseas is up 13.6% since Dec. 31).

He also believes that the company's recent investment in a container-ship outfit will dilute earnings, at least in the near term. (But, he added, "I think it will work out for them the long run.")

Euroseas shares ended trading Friday at $4.31, down 3%, paring earlier losses.

Container-ship investments by companies that haul huge piles of grain and ore appear to be de rigueur. Diana Shipping ( DSX) announced on Friday that it, too, had bought a minority stake in a container shipper, spending $50 million. On a day when the broader equities markets were falling sharply, Diana's stock was one of the few names in the green, though ever so slightly, closing the session up 4 cents at $16.09.

A bullish call Friday by Credit Suisse ( CS) analyst Gregg Lewis perhaps helped buoy Diana shares. Though he left his rating on Diana stock at outperform and his price target at $20, he lifted his 2010 earnings forecast to $1.67 a share from $1.49, based largely on the company's well-known ship-acquisition plan, as well as a savvy chartering strategy.

Elsewhere, DryShips ( DRYS) shares closed down 2.3% Friday at $6.28. Investors were still awaiting word from the company that it has, at long last, signed a contract to lease out one or two of the offshore oil-drilling ships it has commissioned for construction -- part of an ambitious plan to enter the marine energy business.

DryShips needs to pony up about $1 billion to the shipyards in order to pay for the four drillships. Expectations were that the company would have announced a contract by the end of 2009, but midway through January, investors were still sitting at the port terminal, looking up at the departures board (so to speak).

Among other U.S.-listed dry-bulk shipping names Friday, Navios Maritime ( NM) fell 1%, Genco Shipping & Trading ( GNK) declined 1.3%, and Eagle Bulk Shipping ( EGLE) retreated 1.2%.

-- Written by Scott Eden in New York

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Scott Eden has covered business -- both large and small -- for more than a decade. Prior to joining TheStreet.com, he worked as a features reporter for Dealmaker and Trader Monthly magazines. Before that, he wrote for the Chicago Reader, that city's weekly paper. Early in his career, he was a staff reporter at the Dow Jones News Service. His reporting has appeared in The Wall Street Journal, Men's Journal, the St. Petersburg (Fla.) Times, and the Believer magazine, among other publications. He's also the author of Touchdown Jesus (Simon & Schuster, 2005), a nonfiction book about Notre Dame football fans and the business and politics of big-time college sports. He has degrees from Notre Dame and Washington University in St. Louis.

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