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Why Diana Shipping, Eagle Bulk Shipping, and Star Bulk Carriers Stocks All Jumped Today

By Rich Smith - May 7, 2021 at 3:59PM

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The Baltic Dry Index stumbled yesterday, but the tide should keep rising for at least another quarter.

What happened

The Baltic Dry Index (BDI), which measures the rate dry bulk shipping companies can charge, declined yesterday. It was more of a pothole than a plunge (just a 1.7% dip), but this was the first time in nearly a month that the BDI went in any direction other than up, and it might be the start of a trend. 

But even if it is, investors in the dry bulk shipping industry don't seem too concerned. At 3:05 p.m. EDT today, shares of Diana Shipping (DSX -0.83%) were up a strong 7.5%, Eagle Bulk Shipping (EGLE 3.94%) had raced 8.5% higher, and Star Bulk Carriers (SBLK 0.62%) was leading the pack upward with a gain of 11%.

Three colorful arrows racing straight up on a black background

Image source: Getty Images.

So what

The BDI tracks the rates that dry bulk shipping companies can charge for hauling goods like coal, iron pellets, and grain across the ocean. It's down today, but still up more than twofold from where it started the year. And that's a big part of the reason that, yesterday evening, Eagle Bulk Shipping was able to report a huge surge in revenue for its fiscal first quarter.  

Here are the highlights:  

  • Revenue was up 30% year over year to $96.6 million.
  • Cash from operations, which was negative $12.4 million a year ago, transformed to a positive $14.3 million.
  • Net profit, also negative a year ago, surged to a positive $0.84 per diluted share.

In short, it was good news all around at Eagle Bulk Shipping. So even if the company didn't quite make it to the $1.04 per share that analysts had hoped to see, Eagle's business is clearly booming, and its investors are pleased.  

Now what

As well they should be. According to Eagle, the time-charter equivalent (TCE) cost of chartering its ships surged 50% year over year in the first quarter to $15,124 per day. And the BDI predicts that the trend for the coming quarter is similarly positive. "A recovering global economy backed by unprecedented stimulus has led to a surge in demand for commodities and significantly higher freight rates," CEO Gary Vogel said. As of May 4, the company says, it had 71% of its ships already chartered at an average TCE of $20,100, 33% higher than last quarter.

Given that this is a commodity service we're talking about, that implies similarly rising prices for Diana's ships, and for Star Bulk's as well. Just as the BDI predicts, it looks like smooth sailing for the dry bulk industry -- for at least one more quarter.

Rich Smith has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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Stocks Mentioned

Eagle Bulk Shipping Inc. Stock Quote
Eagle Bulk Shipping Inc.
$53.00 (3.94%) $2.01
Star Bulk Carriers Corp. Stock Quote
Star Bulk Carriers Corp.
$25.74 (0.62%) $0.16
Diana Shipping Inc. Stock Quote
Diana Shipping Inc.
$5.95 (-0.83%) $0.05

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