Barclays on Marine Transportation: Supply Overhang Likely to Weigh on Performance; Initiating Coverage
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Rating Summary:
5 Buy, 12 Hold, 2 Sell
Rating Trend: = Flat
Today's Overall Ratings:
Up: 13 | Down: 9 | New: 24
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Barclays on Marine Transportation: Supply Overhang Likely to Weigh on Performance; Initiating Coverage
Barclays analyst, Gary Chase, said, "Marine transportation faces significant supply-growth challenges in the years ahead. Given recent share price declines, equities may have upside from current levels. However, the market backdrop for marine transportation remains challenging as we expect the supply overhang to linger. Prospects for global growth and a flood of capital into the industry created unprecedented order activity for new ships in 2007-08, particularly in the dry bulk sector. Demand growth has largely resumed, as the rising standard of living worldwide has fueled increased demand for commodities; but even four years later, excess supply remains an overhang for rates and profitability. Our top pick in marine transportation is Costamare. On a relative basis, we rate Diana Shipping and Overseas Shipholding Group Underweight."
Initiate Diana Shipping (NYSE: DSX) and Overseas Shipholding Group (NYSE: OSG) with Underweight: DSX is a pure play on dry bulk. While we believe the company is well positioned to benefit from industry restructuring, supply growth is likely to cause further rate and earnings pressure. OSG is heavily exposed to the tanker vertical, which will likely turn faster than dry bulk, but faces more rate pressure."
"Initiate Seaspan Corp (NYSE: SSW), DryShips (Nasdaq: DRYS), and Teekay Corp (NYSE: TK) with Equal Weight: SSW boasts earnings visibility and likely dividend growth, but we see better opportunities elsewhere (like aircraft leasing). DRYS and TK are exposed to tough verticals, but also own alternate assets that have stronger cash flow and earnings."
Barclays analyst, Gary Chase, said, "Marine transportation faces significant supply-growth challenges in the years ahead. Given recent share price declines, equities may have upside from current levels. However, the market backdrop for marine transportation remains challenging as we expect the supply overhang to linger. Prospects for global growth and a flood of capital into the industry created unprecedented order activity for new ships in 2007-08, particularly in the dry bulk sector. Demand growth has largely resumed, as the rising standard of living worldwide has fueled increased demand for commodities; but even four years later, excess supply remains an overhang for rates and profitability. Our top pick in marine transportation is Costamare. On a relative basis, we rate Diana Shipping and Overseas Shipholding Group Underweight."
Initiate Diana Shipping (NYSE: DSX) and Overseas Shipholding Group (NYSE: OSG) with Underweight: DSX is a pure play on dry bulk. While we believe the company is well positioned to benefit from industry restructuring, supply growth is likely to cause further rate and earnings pressure. OSG is heavily exposed to the tanker vertical, which will likely turn faster than dry bulk, but faces more rate pressure."
"Initiate Seaspan Corp (NYSE: SSW), DryShips (Nasdaq: DRYS), and Teekay Corp (NYSE: TK) with Equal Weight: SSW boasts earnings visibility and likely dividend growth, but we see better opportunities elsewhere (like aircraft leasing). DRYS and TK are exposed to tough verticals, but also own alternate assets that have stronger cash flow and earnings."
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