DryShips (DRYS) Sinks 10% in Small-Cap Shipping Sell-Off

NEW YORK (TheStreet) -- Shipping companies navigated rocky waters on Monday in an industry-wide sell-off, with DryShips (DRYS) experiencing the deepest losses in relation to market cap value. The Greece-based freight company sank 10.2% to $3.08 as of 3:10 p.m. EDT.

Rival ocean freight companies also saw heavy losses. Diana Shipping (DSX) fell 1.5%, Navios Maritime Holdings (NM) lost 5.9%, while micro-caps Paragon Shipping (PRGN), Euroseas (ESEA), Eagle Bulk Shipping (EGLE) and Genco Shipping & Trading (GNK) dropped 4.7%, 5.9%, 9.1% and 11.3% respectively. Comparatively, the S&P 500 shed only 0.09%.

DryShips has experienced a volatile October, since it announced a $200 million share offering earlier in the month.

"Drybulk shipping rates and ship values have increased recently and we believe this trend will continue particularly in the larger asset classes," said CEO George Economou in a statement. "We believe this is an opportune time to flexibly access the equity capital markets to reduce some or all of our funding needs through 2014 that we currently estimate at $150 million."

Since the announcement on Oct. 4, shares has plunged 17.3%. Despite the recent plunge, shares have jumped 91.9% year-to-date, far outpacing the S&P 500's 22.17% gain.

TheStreet Ratings team rates DryShips INC as a Hold with a ratings score of C-. TheStreet Ratings Team has this to say about their recommendation:

"We rate DryShips INC (DRYS) a HOLD. The primary factors that have impacted our rating are mixed ? some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its solid stock price performance and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, generally higher debt management risk and disappointing return on equity."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • Compared to its closing price of one year ago, DRYS's share price has jumped by 46.63%, exceeding the performance of the broader market during that same time frame. Regarding the stock's future course, our hold rating indicates that we do not recommend additional investment in this stock despite its gains in the past year.
  • The gross profit margin for DRYSHIPS INC is rather high; currently it is at 50.25%. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of -5.41% is in-line with the industry average.
  • DRYSHIPS INC reported flat earnings per share in the most recent quarter. The company has reported a trend of declining earnings per share over the past year. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, DRYSHIPS INC reported poor results of -64 cents a share vs. -22 cents a share in the prior year. This year, the market expects an improvement in earnings (-29 cents vs. -64 cents).
  • The company, on the basis of change in net income from the same quarter one year ago, has underperformed when compared to that of the S&P 500 and greatly underperformed compared to the Marine industry average. The net income was flat compared to the same quarter one year ago, dropping from -$18.2 million to -$18.21 million.
  • Net operating cash flow has significantly decreased to -$102 million or 179.63% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.

Written by Keris Alison Lahiff.