DryShips Inc. (DRYS), Diana Shipping Inc. (DSX), Eagle Bulk Shipping Inc. (EGLE): 3 Shipping Stocks Set to Sail in the Right Direction

The global economy becomes more closely knit each year. The economic expansion of quickly developing countries requires resources to fuel the fire, and lots of them. The most efficient way to transport mass quantities of raw materials is through dry bulk shipping using large vessels. Assuming that teleportation devices won’t be introduced anytime soon, the bulk shipping industry is here for the long haul.

Shipping services are all fairly standard: The materials are loaded, shipped, and unloaded. Therefore it is difficult for a company to differentiate itself based on quality of service, so other avenues such as rate competitiveness and cost efficiency become big factors in a company’s success. A great example of a company doing just this is DryShips Inc. (NASDAQ:DRYS).

The good
Through what has been a difficult period for shipping stocks, DryShips Inc. (NASDAQ:DRYS) has done a great job growing revenues. Over the past two years, revenues have been growing year over year at relatively high rates and have hit $319.7 million, a 29% increase over the same quarter last year. The fact that DryShips Inc. (NASDAQ:DRYS) can maintain revenues during an imbalanced period of supply and demand gives the company a promising outlook.

DRYS Revenue Annual YoY Growth data by YCharts

Furthermore, the shipping industry is cyclical, with the fall and winter seasons typically being busier. DryShips Inc. (NASDAQ:DRYS) has seen steadily increasing days in deferred revenues, indicating that it has plenty of business coming in even during the spring and summer seasons. This is a very healthy sign since many other shipping companies are struggling or shutting down entirely during off-peak seasons.

A smooth operator
Just as DryShips Inc. (NASDAQ:DRYS) is able to generate revenues during off-peak seasons, it is important for a company to be able to maintain healthy operating margins throughout the year. Another shipping company doing a good keeping these margins open despite lower revenues is Diana Shipping Inc. (NYSE:DSX). As seen in the chart above, revenues have been dwindling, but that does not mean management is not doing its part.

Although there is a steady downward trend, Diana Shipping Inc. (NYSE:DSX) is doing all that it can in the saturated market to keep operating margins positive while weathering the storm. The diminishing revenues are being combated with lower operating expenses as well, particularly during the off-peak seasons. The strategy now is to operate almost exclusively during peak seasons, which is different from the past where vessels were in constant operation to answer the high shipping demand.