Why DryShips Kept Sinking in 2012

2012 is nearing its end, and now's a good opportunity to look at what happened throughout the year to the stocks you follow. If you know the important things that a company achieved, as well as any challenges it failed to overcome, then you can make a better decision about whether it really deserves a spot in your portfolio.

Today, let's look at DryShips (NASDAQ: DRYS  ) . The entire shipping industry has fared terribly in recent years, as a glut of shipping vessels following the economic boom of the mid-2000s has sent shipping rates into the bilge tank. But eventually, the global economy has to turn higher. At that point, will DryShips be able to take advantage? Below, you'll find more on what moved shares of DryShips this year.

Stats on DryShips

Year-to-Date Stock Return

(8.5%)

Market Cap

$696 million

Revenue, Past 12 Months

$1.26 billion

Net Loss, Past 12 Months

($124 million)

1-Year Revenue Growth

30.1%

CAPS Rating

***

Source: S&P Capital IQ.

Has DryShips finally hit bottom?
The shipping industry has been stuck in the doldrums for years, as the ever-plunging Baltic Dry Index points to weaker revenue for shippers. Although Safe Bulkers (NYSE: SB  ) and Navios Maritime (NYSE: NM  ) have found ways to remain profitable even in this tough environment, DryShips is just one of many peers that have consistently lost money throughout the multiyear industry crisis.

One thing DryShips got things right, though, was to diversify into drilling rigs. The company's Ocean Rig (NASDAQ: ORIG  ) subsidiary has seen big surges in revenue, taking advantage of the same trends that has made ultra-deepwater competitor Seadrill (NYSE: SDRL  ) a force to be reckoned with in the world's oceans. DryShips has made public offerings of its Ocean Rig interest, but it still holds a majority stake in the drilling rig subsidiary.

In its most recent quarter, DryShips disappointed investors again. Despite posting an 8% rise in revenue, Ocean Rig's business played a substantial role in those gains. Moreover, DryShips still posted a loss of $0.13 per share, much larger than what analysts had expected. With rival Overseas Shipholding Group having gone bankrupt in November, a long-awaited shakeout in the industry may finally push capacity downward enough to lead to a turnaround for those players that survive it.

Until shipments of major cargo items like coal start moving higher again, it'll be tough for DryShips to see a big turnaround. Investors will likely have to remain patient rather than expecting a quick turnaround for DryShips and its peers. 

A better bet for 2013
If DryShips interests you because of its success with Ocean Rig, then you really ought to look into one of the more exciting plays in the space: Seadrill. To learn more about the strengths and weaknesses of this company, as well as what to expect from Seadrill going forward, be sure to check out our brand-new premium report put together by one of our top Stock Advisor analysts. Click here to get started.

Click here to add DryShips to My Watchlist, which can find all of our Foolish analysis on it and all your other stocks.


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  • Report this Comment On December 17, 2012, at 3:45 PM, kthor wrote:

    how old are DRYS vessels? I know NM are pretty young at I believe an avg of 3-5 yrs old

  • Report this Comment On December 17, 2012, at 4:02 PM, pondee619 wrote:

    "sent shipping rates into the bilge tank". What is a "Bilge Tank"?

    A ship has a bilge and stocks/prices can "tank".

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