Diana Shipping (NYSE: DSX)

04/18/2017 Focused Stock Trader Team

Diana Shipping (NYSE: DSX)

DSX --DSX is a global provider of shipping services. DSX specializes ownership of dry bulk vessels. As of March 2017, the company’s fleet consisted of 48 dry bulk vessels with a combined capacity of 5.7 million dwt. We think shares are worth $8 or more.

There is a lot to like about the outlook for DSX. Below we recap key takeaways from recent earnings calls, announcements, and research reports.

Key Takeaways:

  • The dry bulk marketplace has been challenging, but the company has survived by maintaining financial strength and operational flexibility, while positioning the business for the long-term.
  • The operating loss in 2016 was largely driven by an impairment of an investment in Diana Containerships. The company is not struggling as much as the financials suggest on a surface level read.

  • Turning to the balance sheet, cash and equivalents totaled $121 million at December 2016. Long term debt was about $600 million compared to stockholders’ equity of $1.1 billion.

  • Several developments in the most recent quarter confirmed control over operations and sharp focus on long term business prospects. The company was able to cancel a ship building contract due to a delayed delivery timeline, which led to a payment refund.

  • Several new orders for ships were placed on reduced rates based on favorable negotiations.

  • The improvement in the Baltic Dry Index looks sustainable and is no doubt encouraging according to the management. The estimate for 2017 stand at 5 billiontons, an increase of about 2% compared to 2016. Trade in China and the Eurozone is showing signs of improvement. Germany is doing particularly well. Much of the improvement is tied to new plans announced by President Trump.

  • JP Morgan recently upgraded the stock to overweight with an $8 price target. This is an easy valuation to hit considering most analyst models reveal the company’s capacity to earn $1.00 or more in EPS.

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