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Why Castor Maritime Stock Popped After Earnings

By Rich Smith - Jun 3, 2021 at 10:45AM

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For the first time in a long time, Castor Maritime is profitable again.

What happened

Investors in Castor Maritime (CTRM -2.25%) stock are having a very good day Thursday.

In 10:10 a.m. EDT trading, shares of the dry bulk shipper jumped a solid 18.5% in response to news that Castor had finally become profitable again -- after four straight quarters of trying and failing.  

Stock chart shows a red line going down in 2020 and going back up in 2021

Image source: Getty Images.

So what

In Castor Maritime's Q1 2021 earnings report, released this morning, the shipper says it earned $1.1 million ($0.02 per share) on quarterly sales of $7 million. That was a big change from the $0.68 in losses Castor reported in the year-ago quarter, and the company's sales increased 159% year over year, turning Q1 into what CEO Petros Panagiotidis calls "a transformational period" for the business.  

And Castor Maritime intends to build on this momentum. Since the year began, Castor says it has acquired one Capesize transport vessel and seven Kamsarmax and four Panamax dry bulk carriers, as well as one Aframax, five Aframax/LR2, and two MR1 tankers -- 20 new ships in all, giving the company a fleet of 18 dry bulk carriers and eight fuel tankers. 

Now what

The diversification into oil shipping insulates Castor Maritime from the volatility of the dry bulk shipping market somewhat. And yet the company's fleet still remains heavily weighted toward the dry bulk industry. This could be a problem because although the Baltic Dry Index (which tracks the rates that dry bulk shipping companies can charge for hauling dry bulk goods such as coal, iron pellets, and grain) remains up 84% for the year, it's fallen 22.5% since peaking on May 5 -- and continues to drift lower.  

If the declines in the BDI reverse, or even merely slow, the rest of 2021 could continue to produce strong results for Castor Maritime and its investors. But keep an eye on the BDI either way, because if it does continue to decline, the fact that Castor has tripled the size of its dry bulk fleet could foreshadow a similar increase in its losses.

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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