As 2013 begins, now's a good time to look at the future prospects for the stocks you own. If you don't know where a company's headed in the next year and beyond, then it's impossible to make an informed decision about whether you should add the stock to your portfolio -- or sell it if you already own it.
Today, I'll look at DryShips (DRYS +0.00%). The shipping giant had a horrible year in 2012 as dry bulk rates failed to turn around from their multi-year declines. But will this year finally bring a full-blown economic recovery? Below, you'll learn more about DryShips's prospects for 2013.
Stats on DryShips
|
Average Stock Target Price |
$2.32 |
|
Full-Year 2012 EPS Estimate |
($0.23) |
|
Full-Year EPS Estimate |
$0.06 |
|
Full-Year 2012 Sales Growth Estimate |
12.5% |
|
Full-Year 2013 Sales Growth Estimate |
24.1% |
|
Forward P/E |
35.1 |
Source: Yahoo Finance.
Will DryShips stop taking on water in 2013?
Analysts don't quite know what to think about DryShips. Although they see a continued boom in revenue and a return to profitability, they only see room for about 10% appreciation for the stock from current levels. Moreover, with high valuations, even that estimated gain is speculative.
The bad times for shipping have been going on for years now, as the Baltic Dry Index has stayed at rock-bottom levels after plunging from above 4,000 in mid-2010 to just 700 recently. The entire industry has struggled to survive, with Overseas Shipholding having declared bankruptcy late last year and the ongoing glut in capacity still remaining stubbornly persistent.
But at least during the first week of the year, investors have gotten excited about the prospects of a turnaround in shipping. With a Bloomberg Industries index pointing to extremely bullish expectations for a 17% gain in 2013, DryShips, Eagle Bulk Shipping, and Excel Maritime were among the many shipping companies that soared double-digit percentages today alone.
One driver that could boost shipping activity is natural gas. Already, many companies are working to prepare plentiful U.S. gas supplies for export via liquefied natural gas terminals, which will obviously support LNG tanker owners Golar LNG (GLNG +0.89%) and Teekay LNG Partners (TGP +0.00%). But as the same techniques that discovered plentiful natural gas in the U.S. spread across the world, it could boost economic activity overall, leading to more need for dry-bulk shipping.
The other route to better results could come from DryShips' Ocean Rig subsidiary. The drillship company has been a big factor in reducing DryShips' losses, but with DryShips having sold off parts of its ownership interest in Ocean Rig, it's unclear whether that will remain a long-term boon for investors.
If conditions get better, then DryShips should join the profitable ranks of peers Safe Bulkers (NYSE: SB) and Navios Maritime (NYSE: NM). Until that happens, though, it'll be hard for DryShips to maintain its leadership role in the industry.
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