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A Seaworthy Shipper in Turbulent Times

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With all of the appropriate weather advisories issued concerning perfect storms and rogue waves, earnings season continues to offer a timely glimpse into the battered shipping sector.

Eagle Bulk Shipping (Nasdaq: EGLE  ) passed muster with adjusted net income of $15.1 million for the fourth quarter, thanks to an impressive 64% increase in gross time charter revenue. Eagle retained an amazing fleet utilization rate of 99.5%, even as the fleet expanded to 23 vessels in 2008. With 74% of the fleet's available days covered by contracts in 2009, at rates averaging well above the most recent rates, Eagle continues to steam through the massive disruption to charter rates that plagues operators with greater spot market exposure.

Eagle Bulk Shipping specializes in smaller Supramax-class vessels. Three such ships were recently assigned charter contracts for daily rates between $8,500 and $10,500, after fetching $20,000 to $50,000 at the height of the dry bulk boom last summer. If charter rates rebound quickly, and Eagle avoids Excel Maritime Carriers' (NYSE: EXM  ) unfortunate experience of charter clients reneging on contracts, then Eagle Bulk Shipping might just emerge from this mess relatively unscathed ... or about as unscathed as is possible after a 90% decline in share price from its 52-week high.

Investors remain justifiably skeptical of the shipping sector. The group's former darling, DryShips (Nasdaq: DRYS  ) , continues to suffer from a cargo of debt, fire-sale prices on sales of vessels, and another sale for which the buyer refused delivery. A recent surge in the BDI, the index which tracks charter rates, now appears to have been more about some limited rebuilding of dry bulk stockpiles than a reliable resumption in demand. Nonetheless, steel giant Arcelor Mittal (NYSE: MT  ) CEO Lakshmi Mittal believes that the first quarter of 2009 will mark the bottom for global steel demand. The result is a confusing array of mixed signals and head fakes that have been unkind to investors.

While we await a steel recovery, I continue to view Diana Shipping (NYSE: DSX  ) as the fairest of them all, with Navios Maritime Holdings (NYSE: NM  ) running a close second. With a caveat of caution relating to the company's bold, counter-cyclical expansion (with 24 vessels on order), the Eagle lands in this Fool's top three.

Further Foolishness:

The "dry bulk shipping" tag within Motley Fool CAPS lists 16 companies. Join our online community today and share your views on the offerings in this sector, or any other. CAPS is free and fun!

Fool contributor Christopher Barker captains yachts and writes about stocks. He can be found blogging actively and acting Foolishly within the CAPS community under the username TMFSinchiruna. He owns shares of Diana Shipping. The Motley Fool's disclosure policy stares rogue waves in the eye and laughs.

Read/Post Comments (1) | Recommend This Article (22)

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Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On March 04, 2009, at 4:45 PM, JTShideler wrote:

    If you like Shipping Companies you should check out Stealth Gas (GASS) its expanded from 9 to 36 ships from 2006-2009 while maintaining conservative leverage. While the prices of the handi-size LPG vessels have not fallen as significantly as their Dry Bulk Cousins, GASS's stock price has been treated the same. And when everyone is cutting their dividend, isn't it nice to know that GASS is paying their modest 18.75 cent dividend for another straight quarter.

    GASS didn't offer the rewards that DRYS did in its hay day but it doesn't offer the risk either. Check out my CAPS Blog or the GASS discussion forum for more on the company.

    -Disclosure Long Gass since 2006 and been DCA since October.

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10/21/2016 3:59 PM
EGLE $4.48 Down -0.20 -4.27%
Eagle Bulk Shippin… CAPS Rating: *
DRYS $0.36 Down -0.03 -7.23%
DryShips CAPS Rating: **
DSX $2.51 Down -0.02 -0.79%
Diana Shipping CAPS Rating: ****
EXMCQ.DL $0.00 Down +0.00 +0.00%
Excel Maritime Car… CAPS Rating: ****
MT $6.68 Up +0.15 +2.30%
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NM $1.18 Down +0.00 +0.00%
Navios Maritime Ho… CAPS Rating: ***