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Genco Shipping & Trading Limited ( GNK ) is an international shipping company that transports iron ore, coal, grain, steel products and other drybulk cargoes along worldwide shipping routes. The company's fleet of dry cargo vessels consists of Panamax, Handymax and Handysize vessels.
Genco, a Zacks #2 Rank (Buy), has a young fleet with an average age of six years compared to 16 years in the industry. The company's strategy is to manage and expand the fleet in a way that enables it to pay dividends to shareholders.
On Feb 13, Genco announced its fourth-quarter earnings and beat Wall Street estimates by 11.54%, or 12 cents per share. Net income was $33.5 million, or $1.16 per share, compared to $16.5 million, or 65 cents per share, in the fourth-quarter 2006. Analysts expected $1.04 per share.
Revenues increased 84% to $65.7 million from $35.7 million in the year-ago period, primarily due to the operation of a larger fleet.
The company has been successful in increasing rates. The average daily time charter equivalent, or TCE, rates obtained by the fleet increased 52.4% to $31,140 per day for the fourth quarter compared to $20,435 in the same period in 2006.
81% of the Fleet Secured on Contracts for 2008
On Mar 31, the company announced that it reached an agreement to extend the charter on one of its vessels, the Genco Marine, which was currently on charter with NYK Bulkship Europe S.A. The extended contract will be for 11 to 13 months at a rate of $47,000 per day, not including a 5% third party brokerage commission.
The company now has 81% of the fleet's available days secured on contracts for the rest of 2008. GNK believes securing these contracts will lock in earnings stability and will strengthen its ability to distribute large dividends to shareholders.
Analysts are Bullish about the First Quarter and 2008
Brokerage analysts are bullish on Genco for the first quarter and the year. Two out of five coverage analysts raised estimates in the last 30 days by one cent to $1.46 from $1.45. Sixty days ago, analysts were calling for $1.42 per share.
For the full year, consensus estimates rose 35 cents to $7.13 from $6.78 per share. Sixty days ago, analysts were estimating $6.70 a share.
Despite a recent run in the stock, the company still trades with a 2008 P/E of only 7.97. It has an outstanding five year average return on equity (ROE) of 20%. GNK's current dividend yield is approximately 5.70%. Analysts expect 2008 earnings growth of 36.85%.
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