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Why Star Bulk Carriers Stock Crashed 10% After Earnings

By Rich Smith - May 20, 2021 at 11:48AM

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Earnings surge 12-fold -- but still fall short of expectations.

What happened

Shares of Star Bulk Carriers (SBLK 0.62%) stock tumbled 10% through 11:20 a.m. EDT Thursday after the ocean-going freighter of dry bulk goods reported a titanic increase in earnings for its fiscal first quarter of 2021.

Heading into Q1, analysts had forecast that Star Bulk would earn $0.43 per share on $168.9 million in sales for the quarter. Star Bulk beat that revenue estimate, with sales of $200.5 million, but it missed badly on earnings, bringing in $0.36 per share in profit.  

Crane operator loading a dry bulk cargo ship

Image source: Getty Images.

So what

And yet, $0.36 per share is not an objectively bad number. Given that a year ago, Star Bulk earned $0.03 per share on $160.9 million in revenue, $0.36 per share works out to a 12-fold increase in earnings on just a 25% increase in revenue.

Helping Star Bulk hit that number was a massive 42% increase in the daily Time Charter Equivalent (TCE) rates it was able to charge for shipping services -- a jump predicted by the skyrocketing prices on the Baltic Exchange Dry Index. Meanwhile, operating costs on those vessels climbed only 9% year over year. In Q1, Star Bulk's daily TCE rate on its vessels averaged $15,461, while operating costs were only $4,410.

Now what

And this story could even get better. According to Star Bulk, the "current forward coverage" on its TCE in the second quarter is looking closer to $21,168, a 37% sequential increase. As management explained, "our outlook for the market remains positive due to the reopening of the global economy and consequent increased demand across all key dry bulk commodities."

Despite the optimistic forecast, however, investors seem to be focusing on the fact of the earnings miss today -- and bidding Star Bulk shares lower.

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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Star Bulk Carriers Corp. Stock Quote
Star Bulk Carriers Corp.
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