DryShips Inc. (DRYS) is now a Zacks #1 Rank (strong buy) stock as estimates rise after a tough year where earnings per share dropped by 90%. The stock is now cheap, trading at just 6.6x forward earnings.
Company Description
DryShips operates drybulk carriers and offshore oil deep water drilling worldwide. The dry bulk fleet has a capacity of over 3.4 million deadweight tons and operates 39 drybulk carriers, including 7 Capesize, 30 Panamax and 2 Supramax carriers.
The company’s offshore oil deep water drilling division operates 2 ultra deep water semisubmersible drilling rigs and 4 ultra deep water newbuilding drillships.
DryShips Surprised by 28.57% in the Third Quarter
On Oct 26, DryShips reported its third quarter results and beat the Zacks Consensus Estimate by 6 cents. Earnings per share were 27 cents compared to the Zacks Consensus of 21 cents.
The drybulk carrier segment continues to be challenged by the global economy. Net voyage revenues (voyage revenues minus voyage expenses) fell to $114.8 million from $228.2 million in the year ago period.
The company said the decrease was due to substantially lower freight market compared to the third quarter of 2008.
The offshore drilling segment, however, saw revenues rise 22.1% to $107.6 million from $88.1 million in the year ago period.
Outlook
Going forward, the company is seeing signs of economic recovery from countries other than China and India. Its drybulk fleet is also virtually fixed for the rest of 2009 and for 2010. It is also already 77% fixed for 2011.
Zacks Consensus Estimates Rise
Analysts have been raising estimates since the earnings beat. The fourth quarter Zacks Consensus Estimate has risen 4 cents to 25 cents in the last month.
The 2009 Zacks Consensus has climbed 12.8% to $1.06 from 94 cents per share in the prior 30 days with 7 out of 8 analysts raising during that time.
Fundamentals
DryShips has surprised on estimates 2 out of the last 4 quarters. The company’s price-to-book ratio is just 0.67. Analysts expect 5-year sales growth of 77.18%.
