What happened
Eagle Bulk Shipping (EGLE) missed expectations for earnings in the fourth quarter despite generating stronger-than-expected revenue. Investors were disappointed by the results, sending shares of Eagle Bulk down 15% on Friday morning.
So what
Eagle Bulk provides midsized dry bulk vessels chartered by miners, commodity producers, traders, and end users. The past year or so has been a choppy period for the industry, with the shares losing about half of their value last summer due to fears that a potential recession would eat into charter demand. But the stock was up about 25% year to date heading into earnings on hopes that the worst was over.
The results put the stock in reverse. Eagle Bulk earned $2.76 per share on revenue of $151.4 million in the fourth quarter. Analysts had expected earnings of $2.99 per share on revenue of $125 million.
The issue was costs. Eagle Bulk reported vessel operating expenses were up 16.7% year over year due to higher crew costs, expenses related to the conflict in Ukraine, and one-time expenses including repair costs.
Average daily vessel operating expenses, excluding one-time costs, came in at $6,996 for the quarter, up from $6,028 per day per vessel during the same three months of 2021.
Now what
There are some potential catalysts for this stock heading into 2023: Eagle has a relatively young fleet in an industry full of aging vessels, and China's postpandemic reopening could spark increased demand for the commodities Eagle transports.
But shipping is a cyclical industry, and there is little Eagle management can do during slower-demand periods other than ride out the storm. It appears investors had gotten ahead of themselves in believing that the storm was basically over, leading to an oversized reaction to the earnings results.
