Genco Shipping and Trading Ltd. (GNK) is enjoying the benefits of increased demand and strong pricing power, which helped the company produce excellent first quarter results in which both revenue and net income were up significantly. Estimates continue to rise, and the company's share price has responded accordingly, breaking out from just over $65 only two weeks ago and advancing to their current location of over $77.
Genco Shipping & Trading Limited engages in the ocean transportation of drybulk cargoes worldwide through the ownership and operation of drybulk carrier vessels. It transports iron ore, coal, grain, steel products, and other drybulk cargoes with its fleet of 28 drybulk carriers. The company has a market cap. of $2.22 billion, was founded in 2004 and is based in New York, New York.
Strong First-Quarter Results
Genco shares had already been rallying ahead of the company's first quarter results, released on Apr 30, but the exceptional performance has helped push its stock price even higher. Revenue was up 146% from the same period last year to $91.7 million. Net income took a big jump forward, increasing to $74 million, from $19.8 million last year. $26.2 million of net income came from a one-time gain.
After removing one-time items, this produced diluted earnings of $1.65 per share, ahead of analyst estimates and well ahead of last year's production.
This marks the third time in the last three quarters that Genko has surprised and beaten analyst estimates, having done so by an average of 15 cents, or 15%.
A Bullish Forecast
Driving Genco's solid quarterly results were not just a product of strong demand, but also strong pricing power. The average daily time charter equivalent rates obtained by the company's fleet increased 73.5% to $35,891 per day for the most recent quarter, compared to the same period last year.
As Genco Shipping continues to post solid growth numbers, the analyst community continues to upgrade their earnings projections. Within just the last seven days, the current-year estimate has tacked on 16 cents, moving to its current projection of $7.29 per share.
The Chart
As previously mentioned, GNK shares have been on a nice run after bottoming out below $35 on Jan 16. Since then this stock has raced back to its 52-week and all-time high just above $78. Moving forward, the key to the formation is whether this stock will be able to stabilize in higher territory. We have seen a fair amount of volatility over the past few months, and GNK logged a pretty quick run back into its current territory. If this stock can plant itself and stabilize in higher ground, it bodes well for its short-term trajectory. Take a look at the chart below.
Content Courtesy: Zacks Investment Research
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Tuesday, May 06, 2008
GNK - Genco Shipping and Trading - Revenue was up 146% from the same period last year
Thursday, March 27, 2008
GNK - Genco Shipping & Trading - rates obtained by the fleet increased 52.4%
Genco Shipping & Trading sees the surge in commodities demand first hand as the international shipping lanes hum with traffic. The company saw its rates sharply increase in 2007. Genco is sharing the profits with shareholders with a $50 million share repurchase program in 2008 and a heafty dividend of 6.20%. Genco has surprised on estimates the last two quarters.
Full Analysis
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 #1 Rank (Strong 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 surprised on estimates by 12 cents, or 11.54%. Net income for the fourth quarter 2007 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's rates increased in 2007 compared to 2006. 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.
The increase in TCE rates was due to higher charter rates for five of the Handysize vessels, four of the Panamax vessels, and three of the Handymax vessels in the current fleet. Additionally, higher rates were achieved due to the operation of four Capesize vessels which were obtained as part of the Metrostar acquisition.
Genco also announced a $50 million share repurchase program for 2008.
The company is bullish about its prospects in 2008.
"Going into 2008, we are pleased to have taken delivery of the final vessel under our agreements to acquire six drybulk vessels from affiliates of Evalend Shipping Co. S.A. and remain on schedule to take delivery of two Capesize vessels, one later this month and the other later this year," said Robert Gerald Buchanan, President of Genco.
"With the combination of having approximately 80% of our fleet's estimated available days secured on contracts for 2008 and having two vessels with profit sharing agreements, we are in a strong position to provide shareholders with a high degree of earnings visibility while maintaining the ability to benefit from future rate increases," he said.
Analysts responded to the earnings report by being equally bullish about the company. Two out of six covering analysts raised estimates for the first quarter in the last 30 days by three cents to $1.45 from $1.42 per share. For the year, two out of six analysts also raised estimates in the last 30 days by a consensus of 16 cents to $6.86 from $6.70 per share.
Genco is well-positioned as a value stock with a dash of growth and income. Analysts are estimating year-over-year growth in 2008 at 116.35%. As a bonus, GNK also pays a 6.20% dividend.
The company is an attractive value play. Genco's 2008 P/E is only 7.82, well below the industry average of 20. Its price to book is 2.49. Genco has an outstanding average five year return on equity of 20%. The company reports first-quarter earnings on May 7.
Content Courtesy: Zacks Investment Research
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