Shipping Stock on Watch: DryShips Inc. (NASDAQ: DRYS)
  • Stock Alert for DryShips Inc. (DRYS)
  • Stock Alert for DryShips Inc. (DRYS)
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    Stock Alert for DryShips Inc (NASDAQ: DRYS)

    DryShips Inc. (DRYS) owns, through its subsidiaries, a fleet of 40 drybulk carriers comprised of seven Capesize, 29 Panamax, two Supramax and two newbuilding drybulk vessels, as well as two ultra-deep-water semi-submersible drilling rigs and two ultra-deep-water newbuilding drillships. The Company’s drybulk fleet carries a variety of drybulk commodities including coal, iron ore, and grains, bauxite, phosphate, fertilizers and steel products. DRYS employs its drybulk vessels under period time charters, on bareboat charters, in the spot charter market and in drybulk carrier pools. Its subsidiaries include Ocean Rig ASA, DrillShips Investment Inc. and Primelead Shareholders Inc.

    The Company was founded in 2004 and is based in Athens, Greece.

    Share Statistics (Oct-1-10) FY

    2008

    FY

    2009

    %

    Chg

    Q2 2009 Q2 2010 %

    Chg

    Symbol DRYS Revenue, $Mn 1.08B 819.9M 24.1% 207.5M 224.2M 8.0%
    Current price $4.78 Gross marg. 79.7% 71.9% 9.8% 71.9% 76.2% 6.0%
    52wk Range: $7.62-3.28 Oper. margin -20.5% 9.9% 148.3% 16.2% 47.0% 190.1%
    Avg Vol (3m): 10,313,300 Net margin -33.3% -3.9% 88.3% 24.8% 3.9% 84.3%
    Market Cap. 1.42B
    Shares Outst. 374.0M EPS, $ -8.10 -0.19 97.7% 0.24 0.02 91.7%

    Source: Reuters.com, SEC Filings.

    Financial Summary

    Second-Quarter 2010 Financial Highlights

    • For the second quarter of 2010, the Company reported net income of $8.7 million, or $0.02 basic and diluted earnings per share. Included in the second-quarter 2010 results are various items, totaling $71.7 million, or $0.28 per share. Excluding these items, net income amounted to $80.4 million or $0.30 per share. Included in the second-quarter 2010 results are non-cash amortization of debt issuance costs, including those relating to DRYS’ convertible senior notes, totaling $7.9 million, or $0.03 per share. Included in the second-quarter 2010 results are losses incurred on interest rate swaps, amounting to $63.8 million, or $0.25 per share.
    • Basic earnings per share for the second quarter of 2010 includes a non-cash accrual for the cumulative payment-in-kind dividends on the Series A Convertible Preferred Stock, amounting to $2.5 million, which reduces the income available to common shareholders.
    • The Company reported adjusted EBITDA of $152.3 million for the second quarter of 2010 as compared to $74.2 million in the same period in 2009. For the first half of 2010 adjusted EBITDA rose to $268.8 million compared to $24.5 million in the first half of 2009.

    The Company recorded net income of $8.7 million, or $0.02 basic and diluted earnings per share, for the three-month period ended June 30, 2010, as compared to a net income of $51.5 million, or $0.24 basic and diluted earnings per share, for the three-month period ended June 30, 2009. Adjusted EBITDA was $152.3 million for the second quarter of 2010 as compared to $74.2 million for the same period in 2009.

    Included in the second-quarter 2010 results are various items totaling $71.7 million, or $0.28 per share. Excluding these items, DRYS’ adjusted net income amounts to $80.4 million, or $0.30 per share.

    Basic earnings per share for the second quarter of 2010 includes a non-cash accrual for the cumulative payment-in-kind dividends on the Series A Convertible Preferred Stock, amounting to $2.5 million, which reduces the income available to common shareholders.

    For the drybulk carrier segment, net voyage revenues (voyage revenues minus voyage expenses) increased by $8.9 million to $108.8 million for the three-month period ended June 30, 2010, as compared to $99.9 million for the three-month period ended June 30, 2009. For the offshore drilling segment, revenues from drilling contracts amounted to $109.0 million for the three-month period ended June 30, 2010, as compared to $100.6 million for the same period in 2009.

    Total vessel and rig operating expenses and total depreciation and amortization decreased to $46.7 million and $48.3 million, respectively, for the three-month period ended June 30, 2010, from $51.4 million and $48.7 million, respectively, for the three-month period ended June 30, 2009. Total general and administrative expenses declined to $16.8 million in the second quarter of 2010 from $21.9 million during the comparative period in 2009.

    Interest and finance costs, net of interest income, was relatively stable at $24.1 million for the three-month period ended June 30, 2010, compared to $22.1 million for the three-month period ended June 30, 2009.

    Financial Strength (Sept-30-2010) Company Industry Sector S&P 500
    Quick Ratio (MRQ) 0.54 0.99 1.13 0.82
    Current Ratio (MRQ) 0.54 1.09 1.39 126.73
    Long-Term Debt to Equity(MRQ) 38.01 95.80 53.73 126.73
    Total Debt to Equity (MRQ) 94.41 115.12 74.16 182.55

    Source: Reuters.com, SEC Filings.

    Analyst Consensus

    This is the consensus forecast among 18 polled investment analysts. Against the DryShips Inc company.

    Analyst Detail Buy Outperform Hold Underperform Sell No Opinion
    Latest 5 1 8 2 2 0
    4 weeks ago 6 2 5 1 1 0
    2 months ago 6 3 4 1 0 0
    3 months ago 6 3 4 1 0 1
    Last year 0 1 8 1 3 1

    The 14 analysts offering 12-month price targets for DRYS have a median target of 5.75, with a high estimate of 8.00 and a low estimate of 4.00. The median estimate represents a 19.05% increase from the last price of 4.83.

    Source: www.ft.com

    Consensus Estimates Analysis

    # of Estimates Mean High Low 1 Year Ago
    SALES (in millions)
    Quarter Ending Sep-10 10 215.64 221.65 206.00 224.44
    Quarter Ending Dec-10 9 216.10 221.83 208.00 231.57
    Year Ending Dec-10 15 818.93 865.00 459.30 867.49
    Year Ending Dec-11 15 1,096.59 1,270.84 450.50 1,153.86
    EARNINGS (per share)
    Quarter Ending Sep-10 12 0.24 0.31 0.15 0.24
    Quarter Ending Dec-10 11 0.22 0.31 0.15 0.24
    Year Ending Dec-10 15 0.80 1.15 0.26 0.87
    Year Ending Dec-11 15 1.02 1.71 0.32 1.29
    LT Growth Rate (%) 1 10.00 10.00 10.00 -46.00

    Source: http://www.reuters.com/finance/stocks/financialHighlights?symbol=DRYS.O

    Investment Highlights

    DRYS recently announced that its fully owned subsidiary Ocean Rig UDW Inc. has received a Letter of Award from an American exploration company for a four-well contract for exploration drilling offshore West Africa for a period of about 300 days, commencing in the first or second quarter of 2011. The contract value is approximately USD $135 million. The contract is subject to final documentation.

    George Economou, chairman and CEO of DRYS and interim CEO of Ocean Rig UDW Inc., said, “We are pleased to secure employment for one of our first two drillships that will be delivered from Samsung during the first quarter 2011. This will serve as a catalyst to securing bank financing on preferred terms. We continue to see strong interest for our state of the art sixth generation drillships operated by our experienced ultra-deepwater operator Ocean Rig.”

    DRYS announced the results of its 2010 Annual Meeting of Shareholders (the “Meeting”). The following proposals were approved and adopted at the Meeting:

    • The election of Ms. Chryssoula Kandylidis and Mr. George Demathas as Class C directors of the Company to serve until the 2013 Annual Meeting of Shareholders; and
    • The ratification of the appointment of Ernst & Young (Hellas) Certified Auditors Accountants S.A., as the Company’s independent auditors for the fiscal year ending December 31, 2010.

    DRYS recently announced that it has executed two supplemental agreements under its Senior and Junior Loan Facilities with HSH Nordbank AG, as agent, with an aggregate outstanding balance of $520.9 million as of September 29, 2010. As a result of the amendments in these new supplemental agreements, the Company will be, as of October 1, 2010, in full compliance with all its financial and non-financial covenants under the original facilities, as subsequently amended. Furthermore, effective October 1, 2010, the margin under these facilities will revert back from the higher margins during the waiver period to lower pricing.

    Economou said, “We are pleased to report that DryShips is now in compliance with the original loan covenants on a major portion of the outstanding debt on the drybulk fleet. It has been two years since the collapse of Lehman that led to an unprecedented crisis in the shipping industry. Our strategy of fixed rate charters in both drybulk and offshore combined with longstanding relationships with the banks has led to a substantial improvement in the Company’s balance sheet.”

    Source: http://www.dryships.com

    Technical Analysis

    Source: http://stockcharts.com

    DRYS is trading above its 13-day moving average. This is considered to be the sign of a bullish trend. There is added weight to this indication because the moving average is rising and suggests that there has been buying interest in this stock.

    DRYS is trading above its upper Bollinger Band. Relative to recent price action, the stock is currently overextended and due for either a pause or retracement.

    The MACD for DRYS currently indicates a strong bullish signal for two reasons. First, the MACD is above the signal line, a 9-day moving average. Second, the MACD is above zero, which implies that the underlying moving averages are trending higher.

    Comparative Analysis

    Company Name Ticker Price per Mrkt. Cap. P/E P/S
    Oct-1-2010 symbol Share, $ $ Mn 2010 2011 2010 2011
    Diana Shipping Inc. DSX 12.68 1.04B 8.62 n/a 4.26 n/a
    Genco Chipping & Trading Ltd. GNK 15.96 566.29M 3.59 n/a 1.40 n/a
    Navios Maritime Partners L.P. NMM 18.41 644.09M 11.73 n/a 6.51 n/a
    Bulk Shipping Median 750.12M 7.98 n/a 4.05 n/a
    DryShips Inc. DRYS 4.78 1.42B 25.14 n/a 1.47 n/a

    Source: Thomson Financial

    Insider Trading Activity

    NET SHARES PURCHASE ACTIVITY

    Inside Purchases – Last 6 Months

    Shares Transaction
    Purchases n/a n/a
    Sales n/a n/a
    Net Shares Purchased (Sold) n/a n/a
    Total Insider Shares Held n/a n/a
    % Net Shares Purchased (Sold) n/a n/a
    Net Institutional Purchases — Prior Qtr to Latest Qtr
    Shares
    Net Shares Purchased (Sold) n/a
    % Change in Institutional Shares Held n/a

    Source: Yahoo Finance

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