Another quarter, another mismatch between expectations and results for shipper Excel Maritime (NYSE: EXM). Unlike last time around, however, the fourth quarter's numbers blew expectations out of the water. With shares having been cut in half from their December highs, Monday's news was quite a relief.
Excel's daily freight rates were dynamite during the quarter, up 85% over the prior year and 31% sequentially. That's pretty impressive, considering that that company's spot market exposure was fairly limited, at 22% of available days. Still, even somewhat staid period rates pounced 46% higher.
Fleet utilization was another critical factor, rising to 97% from 93% last quarter. To anticipate this result, one would have had to do some serious sleuthing. Investors will continue to lack visibility for this critical component of operations, so long as Excel neglects to estimate future off-hire days in its quarterly releases.
Rollicking rates and very busy vessels naturally made big waves on the quarterly income statement. Revenue rose 73%, EBITDA doubled, and per-share earnings more than tripled. Not bad for a company trading at roughly four times analysts' full-year earnings estimate.
Of course, the more volatile the line of business, the bigger the potential gap between earnings estimates and reality. Dry-bulk rates can and do change on a dime. Still, there are a few factors making me think that the caution here is slightly cuckoo, even after yesterday's share price leap.
For one, Excel's available days are already 61% fixed for 2008. The firm is also soon linking up with Quintana Maritime (Nasdaq: QMAR), a firm with a strong chartering bent. Even if the spot market stumbles, Excel looks fairly secure.
In response to my recent article on TBS International (Nasdaq: TBSI), a reader pointed out the advanced age of that company's fleet. This is another important consideration, because if your average vessel is getting on in years, you're likely looking at a pretty heavy maintenance schedule. For this reason, he likes DryShips (Nasdaq: DRYS) and Diana Shipping (NYSE: DSX) for their young fleets. Excel, with an average vessel age of just less than 14 years, sails some middle-aged maidens, but the fleet's not about to go to seed. TBS' fleet, 50% older on average, is more of a concern.
