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What happened
Shares of dry bulk shipping stocks had an eventful day on Wednesday, as Scorpio Bulkers Inc (NYSE: SALT) and Star Bulk Carriers Corp (SBLK -1.96%) surged double digits on the back of a stock upgrade. But DryShips Inc. (DRYS) went the opposite direction, falling as much as 12.3% in trading. At 3:30 p.m. EST Scorpio's shares were up 12.5%, Star Bulk Carriers were up 17.6%, and DryShips was down 11.1% on the day.
So what
What started the move today was Evercore ISI upgrading its stock rating on Scorpio Bulkers from a hold to a buy, and putting a $7.50 price target on the stock. This follows JP Morgan's upgrade of the stock from neutral to overweight on January 26.
Part of the optimism for dry bulk shippers has been a steady rise in the Baltic Dry Index over the past year. According to Bloomberg, the index is up 150% in the past year, which should mean rising dayrates and therefore revenue and earnings for shipping companies.
Interestingly, Dryships continues to fall as investors lose faith that the company will be able to survive. The company has recently tried to move into the gas shipping market and has been refinancing debt, but it's losing money at a rapid rate and doesn't seem to have a path to become cash flow positive anytime soon.
DRYS Net Income (TTM) data by YCharts
Now what
Shipping stocks are up today on pure speculation, but that's been their driver for the last couple of months. There's a lot of hope that economic stimulus will lead to more economic spending and more trade, which will eventually make its way into shipping companies' coffers. That's a risky bet, and with analysts expecting losses through the end of next year for all three companies it's not an industry I would jump into today.
