Seaspan Earnings: An Early Look

Earnings season is winding down, with most companies already having reported their quarterly results. But there are still some companies left to report, and Seaspan (ATCO) is about to release its quarterly earnings. The key to making smart investment decisions with stocks releasing their quarterly reports is to anticipate how they'll do before they announce results, leaving you fully prepared to respond quickly to whatever inevitable surprises arise. That way, you'll be less likely to make an uninformed knee-jerk reaction to news that turns out to be exactly the wrong move.

The shipping industry has been dealing with big problems for a long time, and with its containerships, Seaspan has been right in the middle of the fray. Yet the company's stock has fared much better than many of its shipping peers. Let's take an early look at what's been happening with Seaspan over the past quarter and what we're likely to see in its quarterly report on Tuesday.

Stats on Seaspan

Source: Yahoo! Finance.

Will Seaspan sail upward this quarter?
Analysts haven't been confident about Seaspan in the past few months, pulling back on their fourth-quarter earnings estimates by $0.02 per share and reducing full-year 2013 calls by a more substantial $0.13 per share. Yet the stock has moved substantially higher, rising 17% since early December.

Investing in most shipping companies has been disastrous in recent years. A glut of shipbuilding and rock-bottom levels for the Baltic Dry Index have sent DryShips (DRYS) and Genco Shipping (GNK 0.47%) scurrying for cover as their share prices plunged, and even once global commerce starts gaining speed again, it'll take a long time for the industry to work off its excess capacity.

But Seaspan has taken a brilliant approach toward its fleet. Rather than bearing the risk of the market, Seaspan builds containerships and immediately leases them under fixed-price long-term contracts that leave the lessees with a lot of the risk, including fuel prices, and avoids the volatility that can come from repeated renegotiation of charter terms.

Seaspan has reached its initial goal for fleet size, with 69 ships. But it continues to expand capacity, having recently taken advantage of low vessel prices by ordering five new ships to be delivered in 2015 and eight smaller vessels for 2014. Yet even with these capital expenditures, Seaspan manages to pay a lucrative dividend exceeding 5%.

In its quarterly report, watch for Seaspan to discuss any possible changes to its longer-term strategy. With all the recent shipbuilding activity, Seaspan is clearly banking on a big recovery in the global economy, and if it pans out, shareholders should end up feeling as if their ship has come in.

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