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Evercore Tips Stocks To Close Gap On Rates

|Includes: Eagle Bulk Shipping Inc. (EGLE), GNK, GOGL, NM, NMM, SALT, SB, SBLK

Summary

Jon Chappell positive on fourth quarter with 2018 market balance best in half a decade.

After three years in the freezer dry bulk is thawing in the eyes of Evercore ISI

Evercore ISI expects bulker stocks to catch up with stronger freight rates amid the belief the market will perform well for the balance of this year and into 2018.

Analyst Jon Chappell says bulker owners’ shares are lagging the rate improvement seen in the latter part of the summer ahead of a projected fourth quarter rebound.

“We believe most dry bulk stocks should also trend well over the next several months, narrowing the recent underperformance to rates and better reflecting the improving market outlook for 2018 and beyond,” the analyst said in a report.

While he says the gap between equities and rates has begun to narrow, interesting investment opportunities remain the space.

Chappell says the fourth quarter is typically a strong period, while the supply demand outlook for 2018 is the most favourbale in four or five years.

He is also positive on the demand side, suggesting imports of iron ore would remain strong, while the northern hemisphere grain season is set to kick off.

“As such, we look for dry bulk rate momentum to continue to trend favorably, bringing the equities along for the ride,” Chappell said.

Disclosure: I am/we are long NMM.