Rally in Dry Bulk Has a Hole in It, Thinks Analyst (GNK)

March 22, 2013 10:25 AM EDT
Get Alerts GNK Hot Sheet
Price: $11.82 +10.16%

Rating Summary:
    2 Buy, 4 Hold, 6 Sell

Rating Trend: Up Up

Today's Overall Ratings:
    Up: 24 | Down: 17 | New: 14
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Since the start of the year dry bulk stocks rallied and are higher by 49 percent on average. Yesterday a number of shippers including Genco Shipping & Trading Ltd. (NYSE: GNK) experienced strong moves to the upside. The move higher continued early on Friday. Bullishness is being tied to improving market optimism and recovery in China.

"While the merits of this trade are debatable (we believe it’s still too early), several names with overestimated 'option value' led the way, with Eagle Bulk Shipping (Nasdaq: EGLE), Excel Maritime Carriers (NYSE: EXM), and GNK trading up 74% ytd on average, despite maintaining significant, and in some cases immediate balance sheet/bankruptcy risk," said Michael Webber.

"We actually think this trade may be punctuated by a Chapter 11 filing as opposed to a return to broad-based profitability, and while this idea that multiple players in the dry bulk space won't survive is not new, what is new is that the market seems to have forgotten it," added the analyst.

Wells Fargo has Underperform ratings on Diana Shipping Inc. (NYSE: DSX), Eagle Bulk Shipping, Excel Maritime Carriers, and Genco Shipping & Trading,

Webber thinks more restructuring is likely on the way at DryShips (Nasdaq: DRYS) and notes significant balance sheet risk at Eagle, Excel Maritime, and Genco.

For an analyst ratings summary and ratings history on Genco Shipping click here. For more ratings news on Genco Shipping click here.

Shares of Genco Shipping closed at $3.01 yesterday.

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