DRYS: Shipper of the Global Commodities Boom

Feb.25.08 | About: DryShips Inc. (DRYS)

Well, after announcing blockbuster earnings with Q4 EPS of $5.37 vs. consensus of $4.07 and Q4 revenues of $233.379M vs. consensus of $208.75M, DRYS is now #1 on the IBD list and for good reason. DryShips (NASDAQ:DRYS) is a global leader and is based in Greece, the global shipping leader.

They own and operate drybulk carriers worldwide carrying every type of booming dry commodity you can think of. They run the transport cells to the global economic body.

They deliver coal (booming), iron ore (booming), grains (booming), baxite, phosphatee (booming), fertilizers (booming), and steel products (booming). DRYS stock price seems correlated to the moves of the Baltic Dry Index (BDI). The Street.com has a very good look into DRYS and what they do. DRYS has a very nice P/E ratio of 6.57 with a forward of 6.14. Quarterly revenue growth of 195% and quarterly earnings growth of 443.5% (um does someone see some sort of discrepency here?). I love, love their float at 24 million shares for the world to trade and they do trade this puppy with an average volume of almost 6 million shares a day.

Short interest is at over 3 million shares or over 12.5% of the float. The year highs were at $131.34 with recent lows at $50. Analysts are bullish as well. Here are their comments:

On Feb. 19th, Jefferies reiterated their Buy rating following the upside to Q4 results and saidd they believe dry bulk spot charter rates are likely to remain strong throughout 2008 and finds shares attractively valued at current levels. Target remains $160.

On Feb. 15th Cantor reiterated their BUy rating with a $121 price target saying they believe the company continues to benefit from a sustained strong dry bulk market.

Now they do have some bears with Howe Robinson Shipbrokers on Feb. 7th saying that a global downturn would hit dry bulk shipping faster and harder than expected, also it is of note that the global steel industry accounts for half of dry bulk demand. MT and RIO recently raised iron ore prices do you think they raised due to softening demand? Nope, i don’t think so. I also believe that the worst case scenario has already been priced into the stock after dropping from $130 to $50 and the Dry Bulk Index dropping from its highs to the present.

On a technical note one can see an inverted head and shoulder formation since December. The double bottom head sits on $50 and the neck line is around $80. The length between the two is $30 and could indicate a short term target of over $110 off of the right shoulder break.

click to enlarge

Disclosure: Long DRYS