The Baltic Dry Index is not just at a year low.  It is back to lows at the peak of the recession 2007 to 2009.  It is hard to imagine.  One of the major issues may simply be high excess in capacity.  Shipping may have run into the same problems as the worlds manufacturing lines.  There may just be too much supply now versus demand.

Since the recession, boats have continued being built.  The world just may be awash in capacity.  It is surprising but the shipping stocks are actually holding up well with the stock market rather than tanking with tanker day rates.  Here is how some of the more active ship stocks look, even though not all are exactly pertinent or covered under the Baltic Dry Index:

The Guggenheim Shipping ETF (NYSE: SEA) is up 0.7% today while its 52-week trading range is $13.37 to $28.21.  If you tally up the last four dividend payment this one has a yield of about 5.7% but you have to keep in mind that three-quarters of that dividend is from the June quarterly payment last year.

DryShips Inc. (NASDAQ: DRYS) is down 0.5% at $2.18 and its 52-week range is $1.75 to $5.19.

Ship Finance International Limited (NYSE: SFL) is up a penny at $11.56 but its 52-week range is $8.62 to $21.15.  Its dividend is well above 10% now.

Nordic American Tankers Limited (NYSE: NAT) is down five cents at $13.95 against a 52-week range of $11.58 to $26.18.  Its dividend is now over 8%.

Is it possible that not all of the old ships in the world are being sent to India and Sri Lanka for scrapping any longer now that India has slowed down its blistering pace?  There are many reports calling it a dead index as well.  Stay tuned.  Imagine how well shipping stocks might perform when the underlying price index is cooperating.

See the index chart for the last five years below….

JON C. OGG

To start with the worst, Frontline is down more than -88% for the year, and its median target price has dropped to $6.00 from $7.25 in late October. At today’s share price of $2.98, the potential upside is slightly more than 100%. DryShips is not much better, with a lower target price of $5.00. At today’s price of $2.37, the implied gain is nearly 111%. Neither Excel nor Diana is as bad, but neither is likely to achieve anywhere near their implied gains of 63% and 46%, respectively. The shipping business has too many ships sailing around at unprofitable day rates. Until that situation resolves itself — not likely until 2013 — anything that resembles value in the shipping business is likely a mirage.

Railroads are faring better because rail traffic is up. The Association of American Railroads reported this morning that November carload traffic on US railroads grew 4% compared with November 2010. Intermodal traffic (containers) grew by 3.7% year-over-year. The largest increase came in motor vehicle carloads, which grew by 42% compared with last year and petroleum product carloads which grew by more than 28%.

Another large gain, more than 30%, came in carloads of crushed stone, sand, and gravel. Because beach sand is the most common material used in hydraulic fracturing of oil and gas wells, it’s probably a reasonable assumption to give the drilling industry credit for the increase.

Of the four railroads, Union Pacific and Norfolk Southern have both had target price boosts since late October. Union Pacific’s median target price is $114.00, up from $110.00. At a current price of $102.70, the potential upside in UP’s stock is 11%. The company’s dividend yield of 2.4% is also tied with Norfolk Southern’s for the best in the group.

Norfolk Southern’s median target price is $85.50, up from $82.00. At a current price of $74.90, the stock has a potential upside of 14.5%. With a slightly higher implied gain and an equal dividend yield, Norfolk Southern might be the best bet among the railroads.

In trucking, J.B. Hunt’s median target price fell from $49.00 to $48.00, but that was quite likely due to two brokers dropping coverage. At today’s price of $$45.40, the potential upside for the stock is just 5.7%. The company pays a dividend yield of 1.2%.

Landstar’s median target price is $52.00, up half a dollar from late October, and again likely due to a drop in the number of brokers covering the stock. At today’s price of $45.90, the potential upside for the stock is 13.3%. Landstar pays a dividend yield of 0.5%. Earlier this week, Landstar was downgraded from ‘buy’ to ‘neutral’ at SunTrust.

Of the two trucking companies, neither has a clear edge over the other. Hunt is more fully valued, but the company reported record results in the third quarter. If Hunt can do that again, then the current target price will be left way behind. Hunt’s strength in intermodal transportation could easily make that happen.

Of all ten stocks reviewed here, Norfolk Southern may be the safest bet, but J.B. Hunt may add more significant growth potential to its relatively limited upside potential.

Paul Ausick

General Maritime Corp. (NYSE: GMR) filed for bankruptcy protection yesterday citing low shipping rates for its fleet of 33 crude oil carriers and the company’s inability to comply with its debt covenants. Shipper Omega Navigation Enterprises Inc. (OTC: ONAVQ) filed for bankruptcy in July, and there is good reason to be concerned about other shippers like Teekay Tankers Ltd. (NYSE: TNK), Overseas Shipholding Group Inc. (NYSE: OSG), Nordic American Tanker Shipping Ltd. (NYSE: NAT), and Frontline Ltd. (NYSE: FRO).

Tanker rates are far below break-even rates and could stay there throughout 2012. The day rate for a very-large crude carrier (VLCC) is currently around $7,800, far below a break-even rate of around $30,000. To combat the low rates, some ship owners are considering selling their ships for scrap value. According to a report at Bloomberg, the cost to buy a 15-year old tanker is currently $23.5 million, while the scrap value of such a vessel is $17.25 million. That’s the narrowest difference in at least five years.

As much as 5% of the world’s oil tanker fleet could be scrapped in the next 18 months, but that would only raise rates to an estimated $12,817 by 2013, still less than half what is needed to hit a break-even rate. When profitability will return is anyone’s guess.

General Maritime and Omega Navigation depended heavily on the spot market for cargoes, which is a good position when prices are high, but a bad position when prices are low. Teekay has said that it has half its fleet booked through next summer, and could cover its costs even if the rest of the fleet remain idle. But in its third quarter earnings report, the company said it lost $291.2 million on fewer shipments and lower day rates. If there was any good news there, it was that Teekay didn’t lose as much as analysts had expected.

Tanker owners aren’t the only ones now struggling. Dry bulk shipper DryShips Inc. (NASDAQ: DRYS) actually beat estimates in its third quarter, primarily on the strength of the company’s move into offshore drilling vessels, not its shipping business. The company’s posted EPS loss of -$0.58 was better than the consensus estimate of -$0.61.

Navios Maritime Holdings Inc. (NYSE: NM), another dry bulk shipper, reported better-than-expected earnings yesterday, but net income was down year-over-year on increases in finance costs and higher depreciation/amortization charges. The company has said it is seeking a partner bank to acquire assets of distressed shippers at fire-sale prices. Frontline has also made the same claim.

Shares of Teekay Tankers are up about 1.4% in the first half hour of trading this morning, at $4.59, in a 52-week range of $3.48-$12.99. Navios shares are up about 0.8%, at $3.81, in a 52-week range of $2.88-$5.99. Frontline shares are down about -0.4%, at $5.72, in a 52-week range of $3.88-$28.93. DryShips is up nearly 0.8%, at $2.58 in a 52-week range of $1.75-$6.44.

Paul Ausick

Crude oil is at $98.03, up 0.26%

Gold is at $1,763, up 0.21%.

Hong Kong’s Hang Seng closed up 0.91% to 19,137.

Japan’s Nikkei closed higher by 0.16% to 8,514.

The U.S. 10-year is at 2.05%, down 0.o1%.

The FTSE is up .95% to $5,497.

The DAX is up 1.96% to $5,984.

E Trade Financial Corporation (NASDAQ: ETFC) is down 5% before market open to $9.00, relative to a 52-week range of $7.74 – $18.13. The company announced the conclusion of its inquiry into strategic alternatives.

Dillard’s Inc. (NYSE: DDS) is down 4.8% to $52.50, relative to a 52-week range of $28.03 – $61.08. The company’s third quarter profit jumped 85% from the same time last year.

Dryships, Inc. (NASDAQ: DRYS) is up 1.7%  to $2.88, relative to a 52-week range of $1.75 – $6.44.

Green Mountain Coffee Roasters (NASDAQ: GMCR) is up 1% premarket to $41.30, relative to a 52-week range of $29.55 – $115.98. This small jump comes after shares of GMCR fell nearly 40% yesterday during regular trading hours.

Tesla Motors, Inc. (NASDAQ: TSLA) is up 2.4% before market open to $32.09, relative to a 52-week range of $21.11 – 36.42.

Activision Blizzard (NASDAQ: ATVI) is up nearly 3% premarket to $14.15, relative to a 52-week range of $10.40 – $13.75.

Allot Communications, Ltd. (NASDAQ: ALLT) is down 6.5% before market open to $14.29, relative to a 52-week range of  $6.86-$19.15.

DryShips, Inc. (NASDAQ: DRYS) is up 6.25% before market open to $2.89, relative to a 52-week range of $1.75 – $6.44. The company posted slightly better earnings per share than expected.

McCormick & Schmick’s Seafood Restaurant (NASDAQ: MSSR) is up 28% premarket to $8.68, relative to a 52-week range of $5.43 – $10.47. Landry’s has announced it would buy the company for $136 million.

Targacept, Inc. (NASDAQ: TRGT) is down more than 55% before market open to $8.45, within a 52-week range of $14.42 – $30.47.

Transportation stocks get a lot more attention as economic bellwethers than they do as market participants. Railroads, ships, and trucks are not particularly glamorous, and the industries are so entrenched that they most resemble utility stocks.

The companies included in today’s overview are CSX Corp. (NYSE: CSX), Norfolk Southern Corp. (NYSE: NSC), Union Pacific Corp. (NYSE: UNP), Canadian Pacific Railway Ltd. (NYSE: CP), Diana Shipping Inc. (NYSE: DSX), DryShips, Inc. (NASDAQ: DRYS), Excel Maritime Carriers Ltd. (NYSE: EXM), Frontline Ltd. (NYSE: FRO), JB Hunt Transport Services Inc. (NASDAQ: JBHT), and LandStar System Inc. (NASDAQ: LSTR).

Of the ten stocks we’re looking at today, only one trades more than 10 million shares a day and most of the others trade less than 3 million.  On the surface, it would seem that all these stocks would more or less trade in parallel. In practice, though, railroads and trucking companies are faring far better than sea-borne shippers. Railroads are hauling more coal, and trucking companies are having trouble meeting demand for their services. Shippers overbuilt their fleets, and the resulting collapse in day rates has been punishing for their top and bottom lines.

Cargo traffic is closely watched at this time of year as a predictor of holiday retail sales. Typically, ocean container shipping headed to the US tips the coming strength of retail sales. This year, container shipments have been somewhat lower, and this month’s totals will really tell the tale. Rail and truck traffic has been strong though, although the shortage of available trucks is diverting more container (intermodal) traffic to the railroads.

All data from Yahoo! Finance, and share prices were collected shortly before noon today.

CSX Corp. (NYSE: CSX) has a median target price of $27.00 from 24 brokers. Shares are trading today at $22.66, for an implied gain of $4.34, or 19%. CSX’s forward P/E is 11.73 and the company pays a dividend yield of 2.3%. The stock’s 52-week trading range is $17.69-$27.06, and at today’s price that’s about 28% above its 52-week low, posted earlier this morning, and 16% below the 52-week high. CSX met analysts’ expectations when it reported third quarter earnings about 10 days ago. The company noted a 15% jump in intermodal freight revenue, although volume was essentially unchanged from the same period a year ago. CSX said at the time that it does not expect significant growth in the US, but neither does it predict a double-dip recession.

Norfolk Southern Corp. (NYSE: NSC) has a median target price of $82.00 from 23 brokers. Shares are trading today at $74.74, for an implied gain of $7.26, or 10%. Norfolk Southern’s forward P/E is 12.91 and the company pays a dividend yield of 2.5%. The stock’s 52-week trading range is $57.57-$78.40, and at today’s price that’s about 30% above its 52-week low, posted earlier this morning, and 5% below the 52-week high. Norfolk Southern hauled 23% more coal in the third quarter than it did a year ago, and its intermodal traffic volume increased by 13%. Like CSX, the company expects modest economic growth in the US going forward. The company’s implied stock price gain is about half that of CSX, but with both coal and intermodal traffic up and growing, Norfolk Southern is more likely to bust through its current target price than the other railroads we’ve looked at today.

Union Pacific Corp. (NYSE: UNP) has a median target price of $110.00 from 25 brokers. Shares are trading today at $102.35, for an implied gain of $7.65, or 7.5%. Union Pacific’s forward P/E is 13.15 and the company pays a dividend yield of 2%. The stock’s 52-week trading range is $77.73-$107.89, and at today’s price that’s about 32% above its 52-week low, posted earlier this morning, and 5% below the 52-week high. Union Pacific posted third quarter earnings a week ago, and its international intermodal shipments were down -12% year-over-year. That implies that retailers are buying less in anticipation of a slower holiday shopping season.

Here are today’s big post-earnings news reactions with prices during the last half-hour of trading: McDonald’s Corp. (NYSE: MCD) is up almost 3.5% at $92.09, after hitting new 52-week high of $92.12 earlier in the day; General Electric Co. (NYSE: GE) is down about -2.2%, at $16.26;  Chipotle Mexican Grill, Inc. (NYSE: CMG) is up 7.25%, at $331.00; Freescale Semiconductor Holdings Ltd. (NYSE: FSL) is down about -2% at $11.89; Acme Packet, Inc. (NASDAQ: APKT) fell more than -20% and is trading at $30.37; and Calix Inc. (NYSE: CALX) is down nearly -19% at $6.82, after posting a new 52-week low earlier today of $6.39.

Several other standouts from today include …

Green Mountain Coffee Roasters, Inc. (NASDAQ: GMCR) began the day up about 5% following some harsh words from David Einhorn. The stock is finishing the day up about 1.5%, at $69.01, after dropping nearly -30% since the beginning of the week.

Pure Cycle Corp. (NASDAQ: PCYO) is up more than 27%, to $2.37, after several down trading sessions.

Synaptics Inc. (NASDAQ: SYNA) is up more than 19%, to $32.18, after posting a new 52-week high earlier today. The company has nearly completed its transition to a maker of chips for touchscreens, a much higher margin business than its touchpad chips.

Recon Technology Ltd. (NASDAQ: RCON) is down more than -5%, at $0.97, after getting a letter from Nasdaq for failing to file an annual report.

Stay tuned for Monday.  We have the National Activity Index from the Chicago Federal Reserve Bank at 8:30 a.m. and a speech from Dallas Fed chief Richard Fisher at 9:00 a.m.  The US Treasury has also scheduled three short-term T-bill auctions for late morning.

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BHP Billiton (NYSE: BHP) Cut to Hold at Societe Generale; Cut to Neutral at HSBC.
BP plc (NYSE: BP)Started as Neutral at Nomura.
Chimera Investment Corporation (NYSE: CIM) Cut to Underperform at Stern Agee.
DryShips, Inc. (NASDAQ: DRYS) Started as Equal-Weight at Barclays.
Fifth Third Bancorp (NASDAQ: FITB) Reiterated Outperform at Credit Suisse.
Gafisa S.A. (NYSE: GFA) named as Value stock of the day at Zacks.
Huntington Bancshares Inc. (NASDAQ: HBAN) Cut to Perform at Oppenheimer.
j2 Global Communications (NASDAQ: JCOM) Raised to Outperform as Bull of the Day at Zacks.
JB Hunt Transport Services Inc. (NASDAQ: JBHT) Started as Overweight at Barclays.
LM Ericsson Telephone Co. (NASDAQ: ERIC) Reiterated Buy with $19 target at Argus.
Morgan Stanley (NYSE: MS) maintained Underperform as Bear of the Day at Zacks.
Pall Corporation (NYSE: PLL) added to U.S. Focus List at Credit Suisse.
PetSmart, Inc. (NASDAQ: PETM) Cut to Market Perform at Wells Fargo.
Seagate Technology PLC (NASDAQ: STX) Raised to Outperform at Baird; Raised to Buy at ThinkEquity.
STMicroelectronics (NYSE: STM) Raised to Hold at S&P Equity Research.
Synaptics Inc. (NASDAQ: SYNA) Raised to Buy at Stern Agee; Raised to Hold at Needham.

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JON C. OGG

Container shipping companies, unlike the dry bulk shippers DryShips Inc. (NASDAQ: DRYS), Genco Shipping & Trading Ltd. (NYSE: GNK), Excel Maritime Carriers, Ltd. (NYSE: EXM), and others, are mostly privately held or traded only lightly over-the-counter in the US. The world’s largest container shipper is Denmark’s AP Moeller-Maersk, which is expected to see profits fall by -25% this year as container rates have collapsed. Two publicly traded container shippers are Hong Kong-based Seaspan Corp. (NYSE: SSW) and Greece-based Danaos Corp. (NYSE: DAC).

For the shippers, part of the problem is an over-supply of ships. The container fleet has grown 17% since 2007 and new orders equal nearly 28% of existing supply. Dry bulk shippers have placed orders that would increase capacity by 36%, so the container shippers are a bit more cautious than the bulkers.

The main reason for the slowdown in container shipping is wariness on the part of retailers for the 2011 holiday season. Retail profits in the second quarter gained an average of 11%, the smallest increase in two years. That was due primarily to steeper discounts on goods as retailers cleared out inventories in the quarter to make room for the back-to-school season.

By and large back-to-school customers showed up as hoped. Target Corp. (NYSE: TGT) saw its total sales rise 5.4% in August compared to August 2010. Macy’s Inc. (NYSE: M) posted higher sales as well, and would have done better except for Hurricane Irene. Wal-Mart Stores Inc. (NYSE: WMT) has raised its full-year profit outlook, but most of that is due to increasing sales overseas.

But as news about the US economy and unemployment continue to dominate the front pages, there is some concern that skittish customers will hold back on holiday shopping until retailers put out their markdowns. And uncertainty about customers’ willingness to spend is dampening enthusiasm among retailers as well.

The National Retail Federation acknowledges the slowdown in shipping, but notes that last year holiday merchandise was shipped early as shippers feared a container shortage would hamper deliveries. The group expects September cargoes to jump by 10.4% over September 2010 and October shipping to rise 8%.

A hugely successful holiday season doesn’t appear to be in the cards for US retailers, but no one expects the kind of retail smackdown we saw in 2008. That’s should be some comfort to retailers.

Paul Ausick

Baidu, Inc. (NASDAQ: BIDU) is up 2% premarket on moderate volume to $151.50, relative to a 52-week range of $76.04 – $165.96.

DryShips, Inc. (NASDAQ: DRYS) is down nearly 9% premarket to $2.87, relative to a 52-week range of $2.19 – $6.44. The company reported 2Q earnings of 4 cents per share, compared to Wall St. estimates of 16 cents per share.

Ford Motor Company (NYSE: F) is up 1.5% premarket to $11.03, relative to a 52-week range of $9.81-$18.97.

Joy Global, Inc. (NASDAQ: JOYG) is up nearly 4% premarket to $85.79, relative to a 52-week range of $55.33 – $103.44. The company issued favorable earnings and FY11 revenue guidance.