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Will DryShips (DRYS) Disappoint Earnings This Season?

Zacks Equity Research

DryShips, Inc. (DRYS) is set to release its second-quarter 2014 financial numbers after the closing bell on Aug 5, 2014.

In the last reported quarter, the company delivered a negative earnings surprise of 300%. Moreover, this global diversified marine transporter has missed the Zacks Consensus Estimate in all of the last four quarters, with an average miss of 137.50%. Let’s see how things are shaping up prior to this announcement.

Factors to Consider This Quarter

A major headwind for DryShips is that a significant portion of its shipping contracts are currently under volatile spot market rate. Management declared during its first-quarter earnings call that 36%, 21% and 15% of the company’s fleet will be exposed to the spot market in 2014, 2015 and 2016, respectively. Such a wide exposure will definitely result in severe top-line fluctuations going forward.

Earnings Whispers?

Our proven model does not conclusively show that DryShips is likely to beat the Zacks Consensus Estimate this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. Unfortunately, that is not the case here as elaborated below.

Zacks ESP: DryShips has a negative Zacks ESP. This is because the Most Accurate estimate stands at a loss of 8 cents while the Zacks Consensus Estimate is pegged at a loss of 5 cents. This leads to an ESP of -60.00% for DryShips.

Zacks Rank: DryShips carries a Zacks Rank #3 which when combined with a -60.00% ESP lowers the possibility of an earnings surprise.

We caution against stocks with Zacks Ranks #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing a negative estimate revision momentum.

Other Stocks to Consider

Here are some companies to consider as our model shows they have the right combination of elements to post an earnings beat this quarter.

Nordic American Tankers Ltd (NAT) has an earnings ESP of +41.18% and bears a Zacks Rank #3.

KNOT Offshore Partners LP (KNOP) has an earnings ESP of +9.38% and sports a Zacks Rank #1.

GasLog Partners LP (GLOP) has an earnings ESP of +7.14% and carries a Zacks Rank #3.

Read the Full Research Report on DRYS
Read the Full Research Report on NAT
Read the Full Research Report on GLOP
Read the Full Research Report on KNOP


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