Navios Maritime Partners (NYSE: NMM) is the first among the major dry shippers scheduled to report fourth-quarter-earnings results. Bulls and bears alike of any dry shipping stock should pay close attention not so much to the numbers, but to Navios' actions and words.
Which way is the industry sailing?
Navios Maritime Partners will announce its results and host a conference call on the morning of Jan. 29. Its entire fleet operates on fixed-rate contracts, so there should be little surprise in the revenue and earnings numbers. However, many of those contracts will expire this year. The state of the shipping industry will therefore affect the renewal of contracted rates and could swing the company's fortunes one way or the other.
It's important to pay attention to management's comments in the press release and during the call to try to get an early insight into what's to come for the year. Last quarter, CEO Angeliki Frangou was quite optimistic about the industry and felt that the "the drybulk environment has brightened significantly." She anticipated demand to begin outstripping supply as many ships in the industry are very old and need to be scrapped, while new orders haven't been plentiful enough. Does she still feel the same three months later?
Dividend cash can be the ultimate fortune teller
The second thing that's arguably more important is the dividend policy. Although Frangou seems to have a reputation as a straight shooter when it comes to her industry insights, words are cheap, and the company putting its money where its mouth is can speak decibels of confidence louder than any words can.
Last quarter Frangou said, "We believe that in time investors will find Navios Partners yield extremely attractive. ... We are positioned to increase distribution in the medium term." At the very least, Frangou said that Navios Maritime Partners will maintain its $0.4425 quarterly throughout 2014. Obviously if this dividend gets cut something is very wrong. However, if the company does indeed raise the dividend, then it would be an excellent sign for all players in the field.
What competitors were expecting
Diana Shipping (DSX 1.04%) has a bit of a reputation for being one of the more conservative among major public dry shippers. In Diana's conference call two months ago, the company seemed to have a concern that was the opposite in nature to that of Navios Maritime Shipping. Diana believes that new ship orders are picking up pace and the scrapping of old ships has been occurring at too slow of a rate. It will be interesting to get the latest take from Navios on the outlook of this supply situation. A couple months ago, Diana Shipping was cautiously optimistic about 2014.
Most dry shippers were expecting a seasonally weak first quarter in terms of daily spot rates, and so far they have been correct. The question now becomes for Navios Maritime Partners if the rate environment will pick up steam again and what insights management has to offer.
CFO John C. Wobensmith of Genco Shipping & Trading (GNK 0.05%) mentioned in his company's conference call back in November that he expected the first quarter to be weak before things picked up again. Wobensmith stated, "I think it's fair to say that seasonally, first quarter should be a little softer." Genco Shipping & Trading at that time agreed with Navios Maritime Partners that supply growth would be limited.
Safe Bulkers (NYSE: SB) also concurred with the idea a soft first quarter building into a stronger remainder of 2014. President Dr. Loukas Barmparis called the environment "an early stage of the forthcoming shipping cycle" while CEO Polys Hajioannou stated, "We expect that the market will be slow at the start of the year ... we are optimistic, I would say, after the first quarter of next year."
Foolish final thoughts
The commentary and dividend policy announcement from Navios Maritime Partners should set the tone for the rest of the dry shippers. With three months passed, the company should have deeper and more meaningful insight into the state of the dry shipping industry. Listen and analyze every word as it may give you an edge over the market as to which direction the shippers are headed this year and beyond. It may also give you a heads-up about what the other dry shipping companies are going to say with their earnings reports and in their conference calls.
