Earnings season is winding down, with most companies already having reported their quarterly results. But there are still some companies left to report, and DryShips (NASDAQ:DRYS) is about to release its quarterly earnings report. The key to making smart investment decisions with stocks releasing their quarter reports is to anticipate how they'll do before they announce results, leaving you fully prepared to respond quickly to whatever inevitable surprises arise. That way, you'll be less likely to make an uninformed knee-jerk reaction to news that turns out to be exactly the wrong move.

DryShips has suffered especially hard from the huge decline in the shipping industry in recent years. But the company's deepwater drilling business has helped save it from an even worse fate. Will shipping recover in time to save DryShips? Let's take an early look at what's been happening with DryShips over the past quarter and what we're likely to see in its quarterly report on Wednesday.

Stats on DryShips

Analyst EPS Estimate


Year-Ago EPS


Revenue Estimate

$294.3 million

Change From Year-Ago Revenue


Earnings Beats in Past 4 Quarters


Source: Yahoo! Finance.

Will DryShips sink or float this quarter?
Analysts have pared their estimates on DryShips in recent months, with the biggest change coming in their 2013 full-year consensus, on which they've reversed earlier projections for a profit and now expect a small loss. In response, the stock has given up just about all of its gains from December and January, falling nearly 20% in just the past month.

The hard times for dry-bulk shippers continue, as shipping rates remain at rock-bottom levels due to overcapacity and weak conditions leading to reduced global commerce. Last month's disappointing earnings report from Genco Shipping (NYSE:GNK) stressed the weakness in the industry, as Genco posted a wider-than-expected loss as the Baltic Dry Index still trades near multiyear lows. In particular, commodity demand has been weak, leading to less global transport of commodities by ship.

DryShips stands out among its peers, though, having been punished even more than many of its peers. On a cyclically adjusted basis, the company sports a valuation multiple well below where rival Diana Shipping trades despite Diana's similar challenges in the space.

DryShips hasn't distinguished itself in its internal management. In January, it resorted to paying a counterparty $21 million to accept delivery of two unfinished ships that it had ordered but no longer wants. As long as the industry's poor conditions continue, newly built ships will continue to produce little value for DryShips and its peers, and the industry needs a stop to new building in order for rates to stabilize.

The saving grace for DryShips has been its Ocean Rig (NASDAQ:ORIG) subsidiary, which has tapped into the booming demand for deepwater drillships. But DryShips has been steadily selling off its remaining interest in Ocean Rig, with an offering last month sending its stake below the 60% mark.

In its quarterly report, look for DryShips to give ideas on how it can save its struggling business. With early optimism about the industry at the beginning of the year having faded to more pessimistic views, DryShips needs to quell the bad sentiment before its shares sink into the depths forever.

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Fool contributor Dan Caplinger has no position in any stocks mentioned. You can follow him on Twitter @DanCaplinger. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.