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Why Star Bulk Carriers Stock Just Popped 15%

By Rich Smith - Nov 30, 2020 at 11:43AM

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Baltic Dry Index gains help revive Star Bulk stock.

What happened

Star Bulk Carriers ( SBLK -5.81% ) stock is riding high Monday, up 15.3% as of 10:30 a.m. EST. The dry bulk shipper, which carries commodity cargoes such as iron ore, coal, and grain from country to country, appears to be benefiting from a recent uptick in shipping rates on the Baltic Dry Index.

So what

The index, which roughly tracks the average cost of shipping bulk cargo from place to place (and thus predicts the profits of dry bulk shipping stocks), hit a recent bottom two weeks ago at 1,111 -- down nearly 50% from early October, when the index was approaching 2,100. 

The index is not yet back up to where it once was, but it did return to 1,230 over the weekend, climbing more than 10% over the past two weeks.

Arrow angles up on a green stock chart

Image source: Getty Images.

Now what

This is good news for Star Bulk, which reported its Q3 earnings on Nov. 17 -- just as the index was plumbing its latest low. While profits were up strongly in the third quarter, revenues plunged nearly 20% year over year, shaking investor confidence and sending Star Bulk stock down about 5%. Now, with the all-important Baltic Dry Index marching higher, though, investors appear to be confident that Star Bulk fortunes, too, will improve -- and Star Bulk stock is riding 23% higher than it was the day after earnings came out.

Will Star Bulk's revenues resume rising, and will the stock's gains hold? Wall Street doesn't seem too certain on either point. Currently, analysts who track the stock see Q4 sales coming in 18% below 2019 levels -- nearly as bad as what we saw in Q3, and profits could plunge as much as 39%.

Star Bulk investors might want to take some gains from today's stock price surge and batten down the hatches, because if Wall Street is right, there's another storm coming.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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Star Bulk Carriers Corp. Stock Quote
Star Bulk Carriers Corp.
$19.79 (-5.81%) $-1.22

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