DryShips Inc. (NASDAQ: DRYS)

DryShips Inc. (DRYS) owns a fleet of drybulk carriers, shipping materials and commodities worldwide. In addition to its fleet of vessels, which include 29 Panamax, two Supramax, seven Capesizes and two newbuilding drybulk ships, the Company owns two ultra-deep-water semi-submersible drilling rigs and two ultra-deep-water drillships. With a combined capacity or more than three million deadweight tons, DryShip’s drybulk carriers transport various commodities, including coal, grains, metals and fertilizers. The Company’s services include vessel leasing in the spot charter market as well as in drybulk carrier pools.

Founded in 2004, the Company is based in Athens, Greece, and operates three subsidiaries, including DrillShips Investment Inc., Ocean Rig ASA and Primelead Shareholders Inc.

Source: Reuters.com, SEC Filings.

Financial Summary

Source: Reuters.com, SEC Filings.

Analyst Consensus

The mean of 15 analysts surveyed by Reuters rate shares of DRYS an “Outperform.”

Analyst Recommendations and Revisions

Source: Reuters.com, SEC Filings.

Investment Highlights

The shipping industry has been profoundly affected by the global recession, as measured by the Baltic Dry Index ($BDI), which, after peaking in May 2008 at 11,500, plunged to a low of 800 in early December, then settled at 2,715 as of February 5, 2010. Economists expect a moderate rebound from a collapse in trade starting in May 2008, citing signs of production and purchase orders improvements from Asia, especially China.

Recent news from China, however, that its central bank has embarked on a tighter monetary policy–as well as Greece’s sovereign debt crisis– have spooked global markets, precipitating a sell off by investors of stocks including the dry bulk freight rates as measured by the Baltic Dry Index.

Further signs of growth from Asia’s renewed demand for oil has markedly improved the price of WTIC oil which doubles from its December low of approximately $35 per barrel to approximately $72 as of February 5. Worries of falling steel prices have recently weighed on freight rates, however.

The Company anticipates business to improve, as evidenced by its decision in early July to acquire the remaining 25% outstanding shares of its subsidiary Primelead. Primelead’s assets of two ultra deepwater semisubmersible drilling rigs are expected to produce significant income as offshore oil drilling programs restart worldwide in response to higher oil prices.

Primelead expects delivery of four newbuilding drillships, rounding-out its assets as one the youngest and sophisticated fleet of ultra deepwater drilling rigs in the industry. The delivery dates are scheduled for the fourth quarter of 2010 through the third quarter of 2011.

Two high-profile investment bankers, Credit Suisse and Cantor Fitzgerald have announced the week ended July 10, 2009 upgrades to the Company’s stock. Cantor raised its rating to a “Hold” from “Sell,” while Credit Suisse announced its upgrade of DRYS to “Outperform,” up two rating notches from “Underperform,” citing higher oil prices and anticipated elevated demand for DRYS’ drillships and Primelead’s deepwater drilling rigs. Both Cantor and Credit Suisse raised their stock price targets to $8.

The Motley Fool recently interviewed the Company’s COO Pankaj Khanna in January. Khanna told The Fool that the Company expects to enjoy a better year in 2010 than 2009. Additionally, Khanna said the Company plans to launch DrillShips business publicly this year.

The Company’s Capes presently lease at $40,000 per day, while the Panamax averages $30,000 per day. Industry analysts state that $40,000 per day is an excellent rate at this time of the world economic recovery.

Technical Analysis

Source: http://stockcharts.com/h-sc/ui?s=DRYS

DRYS trades below its 13-day moving average. The 13-day moving average is downwardly sloped, a bearish signal.

The MACD for DRYS currently indicates a bearish signal. The MACD is below the signal line, a 9-day moving average of the MACD. The MACD is also below the critical level of 0, which implies the past price action had been negative. Overall, the chart is bearish.

Comparative Analysis

Source: Thomson Financial

Insider Trading Activity

Source: Yahoo Finance

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