As the demand for commodities is picking up, shipping is also seeing a rebound. Around two days back, according to a Maritime Logistics Professional report, the Baltic Dry Index (BDI) rose to its highest peak in the past 11 years. The index was up by 55 points, to 4,147, and according to the report, this index has been up for the past nine straight trading sessions.
This Index is reported on a daily basis by Baltic Exchange in London. The BDI is a benchmark for the price of moving major raw materials including iron ore, coal and grains by sea.
Using the TipRanks stock screener, let us look at some of the top dry bulk shipping stocks in this sector.
The author is neutral about all the stocks listed in this article.
Star Bulk Carriers is a global shipping company that is focused on the transportation of dry bulk cargoes including iron ore, minerals, and grain. Earlier this month, the company reported Q2 results with voyage revenues of $311.4 million versus $146.1 million in the same quarter last year.
Adjusted earnings came in at $1.26 per share compared to an adjusted net loss of $0.19 per share in the same period last year.
SBLK also declared a quarterly cash dividend of $0.70 per share, payable on September 8 to all shareholders of record as of August 23, 2021. In addition, the company also authorized a share repurchase program of up to $50 million.
Petro Pappas, CEO of Star Bulk stated, “The record low orderbook, combined with the lack of yard space and future vessel propulsion uncertainty combined with covid related inefficiencies, create a very favorable supply side picture for our industry.”
Pappas added that the rise in government spending in the form of pandemic stimulus programs had led to strong commodity demand on a global basis “with robust volumes of iron ore, coal, grains and minor bulks being transported” and expects the trend to continue. (See Star Bulk stock chart on TipRanks)
Around two months back, Jeffries analyst Randy Giveans had been convinced of a recovery in the dry bulk shipping market, following a series of meetings with the SBLK management. He said he expected the recovery to occur due to an improvement in the global economy and a rising demand for dry bulk commodities.
The analyst reiterated a Buy and raised the price target from $25 to $28 (28.4% upside) on the stock.
On TipRanks, SBLK has received 4 positive analyst reviews for a unanimous Strong Buy consensus rating. Furthermore, the stock scores a 9 out of 10 on the TipRanks Smart Score system, which is based on 8 unique data sets, indicating that the stock is most likely to outperform the market.
Meanwhile, the average Star Bulk Carriers price target of $30.67 implies an approximately 40.6% upside potential from current levels.
Genco Shipping & Trading Ltd. (GNK)
Genco Shipping is headquartered in the United States and is a dry bulk shipowner that focuses on the transportation of commodities globally.
In Q2, the company’s revenues went up 63% year-over-year to $121 million, primarily as a result of higher rates for its bulk vessels, both major and minor, and its chartered third-party vessels. Genco reported diluted earnings of $0.75 per share versus a diluted loss of $0.43 per share in the same quarter last year.
The company also increased its quarterly cash dividend by $0.05 per share over the previous quarter to $0.10 per share for the second quarter, payable on August 25 to all shareholders of record as of August 17.
Genco has also agreed to acquire three modern, fuel-efficient Ultramax vessels, bringing the total to six Ultramax vessels. (See Genco stock chart on TipRanks)
Interestingly, while the TipRanks Risk Factors tool indicates that GNK is at a higher financial and corporate risk factor of 91%, compared to the sector average risk factor of 38.8%, the company’s Q2 results seem to suggest otherwise.
That could be because Genco has been revamping its corporate strategy, to center on a low debt-to-equity ratio, growing the company’s asset base and “paying quarterly cash dividends to shareholders based on cash flows after debt service less a reserve.”
When it comes to lowering its debt, the company paid off $82.2 million of debt, or around 18% of its outstanding debt, in the first half of the year.
Following the Q2 results, top-rated analyst on TipRanks from Noble Financial, Poe Fratt, reiterated a Buy and a price target of $28 (48.8% upside) on the stock. Fratt cited the positive outlook for the dry bulk shipping market and added that the “reception to a variable dividend policy has improved, and the fleet renewal program, upside Cape optionality, and higher public float are positives.”
Meanwhile, Hedge Fund activity is up by 40,800 shares in the last quarter.
Turning to the rest of the Street, consensus is that Genco is a Strong Buy, based on 3 Buys and 1 Hold. The average Genco Shipping price target of $27 implies an approximately 43.5% upside potential from current levels.
Eagle Bulk Shipping has headquarters in Stamford, Connecticut and is focused exclusively on the mid-size dry bulk vessel segment, and owns a large fleet of Supramax or Ultramax ships. These ships have a deadweight (DWT) size that ranges from 50 thousand metric tons to 65 thousand metric tons.
In Q2, Eagle’s net time and voyage charter revenues jumped 126.3% year-over-year to $129.9 million because of rising charter rates “as a result of the market recovery with increase in demand for drybulk products,” according to the company’s press release.
Diluted EPS came in at $0.74 per share in Q2, versus a diluted loss of $1.99 per share in the same period last year.
Eagle’s CEO Gary Vogel stated, “We achieved our best ever operating performance, producing an adjusted EBITDA of over $62 million, as the Baltic Supramax Index rose by almost 60% during the quarter, reaching levels not seen in more than a decade.” (See Eagle stock chart on TipRanks)
Following the Q2 results, Noble Financial analyst Poe Fratt reiterated a Buy rating and a price target of $65 (37.2% upside) on the stock. The analyst commented, “GLE’s track record on the fleet renewal program is solid. After closing pending transactions, the fleet will expand to the highest level ever and is well positioned to benefit from continued strong dry bulk market fundamentals.”
When it comes to Blogger Sentiment on the stock, it is bullish and stands at 100%, well above the sector average of 71%.
Turning to the rest of the Street, consensus is that Eagle is a Moderate Buy, based on 2 Buys. The average Eagle Bulk Shipping price target of $66 implies an approximately 39.3% upside potential from current levels.
Danaos Corp. (DAC)
Danaos is an independent owner of modern, large-size containerships. Currently, it has a fleet of 65 containerships with a total Twenty-Foot Equivalent (TEU) capacity of 403,793 TEUs.
In Q2, the company reported operating revenues of $146.4 million, versus $116.8 million in the same period last year. Adjusted earnings per share increased 62.1% year-over-year to $3.34 per share.
Following the Q2 results, Clarksons Platou analyst Omar Nokta raised the price target from $85 to $100 with a 16.9% upside, and reiterated a Buy on the stock. Nokta commented, “Danaos reported strong 2Q results as expected with plenty of even stronger quarterly results set to come over the next few years. The company has secured several new longer-term charters that boost revenue visibility and enhance its earnings quality.”
Turning to the rest of the Street, consensus is that Danaos is a Moderate Buy, based on 2 Buys. The average Danaos Corp price target of $95 implies an approximately 11% upside potential from current levels.
Disclosure: At the time of publication, Shrilekha Pethe did not have a position in any of the securities mentioned in this article
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