DryShips' (DRYS, Financial) results were not strong in the third quarter. The company, however, reported some improvement in revenue, but its earnings were not up to the mark. However, its earnings beat analysts’ estimates. The company believes that it can improve its performance in the future on the back of positive trends in the market. It is now focused on maintaining a strong liquidity position. Let's take a look at its prospects.
Seeing robust traction
DryShips is seeing good contribution coming out of its Suezmax and Aframax segments which are performing marvellously above company’s expectations. Seeing such a momentum in its segments, DryShips is positioning most of its fleet on the spot markets where it is expecting an impressive recovery in 2015. This is a good sign for the company as it can lead to better financial performance of the company, helping it to gain good market share in the upcoming quarters. Furthermore, DryShips enjoys a good cash position which is attractive to the investors but with the recent dividend declaration by Ocean Rig, it is expected to improve its cash reserves.
Moving on, DryShips is pleased to see recovery in the freight rates. This is a positive sign for the company as with this, the charter rates are expected to recover in 2015, strengthening its position in the Drybulk market. All these signs are favourable for growth in the spot markets and as DryShips are largely exposed to these market it is planning to uniquely position itself to take advantage of this full recovery.
Positioning itself for growth
As of now, DryShips is working tirelessly to position DryShips for market rebound with convertible refinancing. The company is seeing smooth way in this and it is now starting to implement the initiatives it has planned for this. With this focus on the convertible financing, the company is expecting good cash to come under its camp which will surely improve its capital structure. This also seems to be benefiting the company on a long term as still it has some technical breaches outstanding and loan maturities in 2015 and 2016 which are also expected to bring more cash, strengthening its market position with an impressive balance sheet.
It is seeing good opportunities from the dry bulk industry section. It is seeing good growth in the demand for the transportation of dry bulk commodity. In the countries such as Brazil and Australia the iron ore exports are increasing. In Australia it has increased with a 26% which is presenting golden opportunities in future. Similarly, In India as the economy is growing, India’s demand for coal is also growing which has increased by 22% in the past. This can also give DryShips good opportunities to grow its business further.
Conclusion
Moving to the fundamentals, the company doesn’t show a trailing P/E due to prevailing losses. But the forward P/E of just 4.90 shows slow earnings growth in the near term. But for the long term, the earnings growth in showing some positive signs as its earnings are growing at a CAGR of 10.00% as compared to the industry average of just 3.41%. This shows that the stock is expected to gain much momentum in future so I would like to suggest the investors to stay away from the stock now and wait for it to show some concrete signs of gaining market share.
