Danaos Corporation's (NYSE:DAC) earnings has been distorted since 2008, due to interest rate swaps ("IRS") that the company entered into between 2006 and 2008, with a majority of them having effective dates in late 2008-2010. The 3M USD LIBOR has decreased by more than 500 bps since 2006 (See Exhibit 1), which has led the company to have yearly losses in excess of $100 million on these contracts.
As the IRS start terminating throughout 2014-2016, the company's free cash flow will increase and its EPS will increase by about 150% from 2013 to 2017. (See Exhibit 2)
Exhibit 2 support:
(click to enlarge)
Background and business overview
Danaos Corporation is an international owner of container ships and...
|FREE||SA PRO MEMBERS|
|IDEA GENERATOR||X||Exclusive access to 10 PRO ideas every day|
|INVESTING IDEAS LIBRARY||X||Exclusive access to PRO library of more than 15,000 ideas|
|SECTOR EXPERT NETWORK||X||Exclusive access to all sector experts for direct consultation|
|PERFORMANCE TRACKING||X||Track performance of all PRO stock ideas|
|PROFESSIONAL TOOLS||X||Professional Idea Filters to zero-in based on industry, market cap and more|