Can DryShips Stock Sail Higher, or Is It Lost at Sea?

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DryShips Inc. (NYSE:DRYS) isn’t exactly a household name. It’s an industrial company whose stock has moved between a dollar and change and five dollars for the last few years. It relies heavily on increased global trade and manufacturing and thus has struggled since the Great Recession. The company specifically provides ocean transportation services for drybulk and petroleum cargoes, and offshore drilling services. The company operates through Drybulk Carrier, Tanker, and Offshore Drilling segments. During the last quarter it owned a fleet of approximately thirty-eight drybulk carriers, comprised of twelve Capesize, twenty-four Panamax, and two Supramax vessels. The stock caught my eye as it is trading at $3.41. The last time I checked in with the stock is was trading in the mid to high $2 range. Is the stock breaking out and is the climate improving for this sector?

Well, in its most recent quarter, the company recorded a net loss of $34.6 million, or $0.08 basic and diluted loss per share, for the three-month period ended March 31, 2014 as compared to a net loss of $116.6 million, or $0.30 basic and diluted loss per share, for the three-month period ended March 31, 2013. This is a huge improvement. Adjusted earnings were $201.2 million for the first quarter of 2014, as compared to $112.0 million for the same period in 2013. This is quite a turn-around even though the company is still losing money.

But how is each segment performing? Well for the drybulk carrier segment, net voyage revenues (voyage revenues minus voyage expenses) were $45.3 million for the quarter compared to $36.9 million for the year ago quarter. For the tanker segment, net voyage revenues amounted to $22.3 million compared to $10.8 million for the same period in 2013. For the offshore drilling segment, revenues from drilling contracts increased by $114.4 million to $360.8 million compared to $246.4 million for the same period in 2013.Total vessels’, drilling rigs’ and drillships’ operating expenses and total depreciation and amortization increased to $179.6 million and to $107.3 million, respectively, for the quarter up from $144.9 million and $82.7 million, respectively, for the same quarter last year. Total general and administrative expenses increased to $49.1 million. Interest and finance costs, net of interest income, amounted to $114.3 million compared to $56.9 million for last year’s quarter. So, while revenues are up, so are expenses.

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