We downgrade our recommendation for DryShips Inc. (DRYS) to Underperform ahead of its fourth quarter 2010 financial results. The drybulk shipping industry is through its most depressive situation where the vessel rate collapsed even below the rate under recession just a year ago.
The spot rate has fallen to such a low level that even surging commodity prices in the Asian markets will fail to offset the loss of the vessel owners. We believe continuation of this pricing trend may significantly jeopardize DryShips’ future financials.
The company is highly leveraged with nearly $2.3 billion of net debt at the end of the third quarter of 2010. We believe recent decision of DryShips to acquire 12 new oil tankers may not be able to generate required synergies due to weak global oil tanker market.
DRYSHIPS INC (DRYS): Free Stock Analysis Report
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