24/7 Wall St. » GMR

Another Shipping Bankruptcy Filing Could Signal More on the Way (GMR, ONAVQ, TNK, OSG, NAT, FRO, NM, DRYS)

Paul Ausick — Fri, 18 Nov 2011 14:59:44 +0000

An over-supply of product leading to a steep drop in price has claimed another victim. No, this is not a story about a solar PV maker, but about shipping, where ships that were ordered in 2007 and 2008 have been hitting the water in big numbers this year at the same time that the global economy continues to get weaker.

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

Filed under: Bankruptcy, Oil & Gas, Transports Tagged: DRYS, FRO, GMR, NAT, NM, ONAVQ, OSG, TNK

More Woes for Shippers (GMR, ONAVQ, TNK, OSG, NAT, FRO)

247wallst — Mon, 05 Sep 2011 16:02:19 +0000

No matter what kind of cargo a shipping company moves, that company is likely to be in some financial distress. Rates for moving containers, dry bulk, and oil are all way down as the global economy continues its snail-like recovery.

Oil carrier General Maritime Corp. (NYSE: GMR) recently received a debt rating from Moody’s that puts the company’s debt at just one notch above default. Omega Navigation (OTC: ONAVQ) has already filed for bankruptcy, as have several other smaller tanker operators. The big problem is over-supply of vessels. Other tanker outfits that will be affected include Teekay Tankers Ltd. (NYSE: TNK), Overseas Shipholding Group Inc. (NYSE: OSG), Nordic American Tanker Shipping Ltd. (NYSE: NAT), and Frontline Ltd. (NYSE: FRO).

We noted last week the over-supply problems for container ships. Shippers ordered new vessels in 2007 and 2008, before the global economy went into paralysis. Now, those ships are being delivered and the added capacity is killing day rates. The container fleet has grown 17% since 2007 and new orders still to be delivered will increase the fleet size by another 28%. The dry bulk carrier fleet that hauls coal and iron ore and similar commodities is set to increase capacity by 36%. The very-large crude carrier fleet could expand by 14% this year alone.

In order to break even, the tankers must charge a day rate of nearly $30,000. The average short-term spot rate from the Persian Gulf to the Far East is now $1,795. Shippers try to make up for that by slow-steaming, which keeps the vessel on the water for a longer time, and by spending more time in port.

Shippers are burning through cash a a ferocious rate as they wait for rates to turn up, but that is not expected to happen for another year or more. Tanker outfit Teekay Tankers had less than half as much cash at the end of 2010 as it did at the end of 2008. Overseas Shipholding burned through nearly half its cash in 2010. Nordic American also saw its cash fall by nearly half in 2010.

Companies with relatively high charter numbers may be better able to weather the storm. Teekay Tankers claims that it has more than half its fleet chartered for the next 12 months, enough to cover all the company’s costs even if the rest of its ships are idled.

The world’s largest tanker operator, Frontline, claims to be on the lookout for buying opportunities as the smaller outfits collapse. With more than $300 million in cash available at the end of last year, the company is positioned to make good on that claim.

The demise of Omega and the possible collapse of General Maritime are a direct consequence of their dependence on the spot tanker market. Spot rates can be much higher than charter rates — and they can also be much lower. These two, and the other small carriers who bet on high spot rates, are headed for some very rough sailing.

Paul Ausick

Filed under: Turnarounds Tagged: FRO, GMR, NAT, ONAVQ, OSG, TNK

Top Analyst Upgrades and Downgrades (ABT, ALU, ATI, CSCO, EL, F, GRMN, GMR, MOT, QCOM, RIMM, SAP, STP, SVN, TIVO)

Administrator — Thu, 18 Nov 2010 13:20:58 +0000

These are some of this Thursday’s key analyst upgrades, downgrades, and initiations seen in Wall Street research calls.

Abbott Laboratories (NYSE: ABT) Cut to Market Perform at Bernstein.
Alcatel-Lucent (NYSE: ALU) Cut to Underperform at Credit Suisse.
Allegheny Technologies Inc. (NYSE: ATI) Raised to Overweight at JPMorgan.
Cisco Systems Inc. (NASDAQ: CSCO) Cut to Underperform at First Global.
Estee Lauder Companies Inc. (NYSE: EL) Raised to Perform at Oppenheimer.
Ford Motor Co. (NYSE: F) Cut to Hold from Buy at S&P Equity Research (late Wednesday call ahead of GM IPO).
Garmin Ltd. (NASDAQ: GRMN) Started as Sell at Stifel Nicolaus.
General Maritime Corp. (NYSE: GMR) Cut to Market Perform at Wells Fargo.
Motorola Inc. (NYSE: MOT) Started as Buy at Stifel Nicolaus.
QUALCOMM Incorporated (NASDAQ: QCOM) Raised to Outperform at Credit Suisse.
Research In Motion Ltd. (NASDAQ: RIMM) Cut to Hold and target cut to $45 from $65 at Stifel Nicolaus.
SAP AG (NYSE: SAP) Started as Market Perform at BMO.
Suntech Power Holdings Co., Ltd. (NYSE: STP) Raised to Hold at Citi after a rival downgrade killed solar stocks yesterday.
7 Days Group (NYSE: SVN) Cut to Equal-weight at Morgan Stanley.
TiVo Inc. (NASDAQ: TIVO) Started as Hold at Stifel Nicolaus.

You can join our free daily email distribution list to hear more about dividend trends, analyst upgrades and downgrades, top day trader and active trader alerts, news on Buffett and other investment gurus, IPOs, secondary offerings, private equity, and more.

JON C. OGG

Filed under: Analyst Calls Tagged: ABT, ALU, ATI, CSCO, EL, F, GMR, GRMN, MOT, QCOM, RIMM, SAP, STP, SVN, TIVO

Oil Tankers Going Nowhere (OSG, TK, GMR, FRO, NAT, PBR)

Administrator — Thu, 28 Oct 2010 13:36:46 +0000

Day rates for crude oil supertankers, VLCCs, peaked in 2009 at around $100,000/day. Today, if you want to ship 2 million barrels of oil from the Middle East to Korea, you’d have to pay just $4,700/day. The collapsing rates are partly the result of a frenzy of new shipbuilding that started in 2008 when demand for oil was driving prices higher and higher. Another explanation is that demand for floating storage is way down, putting those ships back on the market and adding to the glut. Shipping companies Overseas Shipholding Group Inc. (NYSE: OSG), Teekay Corp. (NYSE: TK), General Maritime Corp. (NYSE: GMR), Frontline Ltd. (NYSE: FRO), and Nordic American Tanker Shipping (NYSE: NAT) are feeling the pinch, but some of the shippers’ shares trade near 52-week highs and some trade near 52-week lows.

The tanker fleet is predicted to grow by nearly 13% in 2011, according to an estimate by Morgan Stanley cited at Bloomberg News. There are currently about 526 VLCCs in the world’s fleet. The tonnage currently being built is equal to 27% of the existing tonnage and is the largest increase ever.

And the news won’t get better any time soon. Supertanker rates are expected to remain unprofitable for at least two years. Predictions of lower global GDP growth in 2011 could dampen international trade even more. One broker noted that rates for container ships have fallen for four straight weeks.

Frontline, the world’s largest supertanker owner, hit a new 52-week high in early May and has lost about 29% since then. The shares are still up more than 20% in past 12 months.

The story at Teekay is somewhat different. The shares posted a new 52-week high last week. The company has shed assets to some of its subsidiaries and announced that it would re-start its $200 million share buyback plan. The company also signed a contract with Brazil’s Petroleo Brasileiro SA (NYSE:PBR), or Petrobras, for a floating production storage and offloading vessel starting in the second quarter of 2012.

An analyst from Deutsche Bank has lowered his EPS loss estimate for Teekay from -$0.45 to -$0.75 for the third quarter. EPS loss estimates for General Maritime and Overseas Shipholding also widened. The analyst expects General Maritime to post an EPS loss of -$0.24 and Overseas Shipholding to post a whopping EPS loss of -$1.26, compared with an earlier expectation of -$0.43.

A Frontline executive noted that at current supertanker rates the company is better off anchoring ships and sending the crews fishing. That could be a long fishing trip.

Paul Ausick

Filed under: ADR, Oil & Gas, Transports Tagged: FRO, GMR, NAT, OSG, PBR, TK

Top Analyst Upgrades and Downgrades (ARNA, ARMH, DRYS, GMR, GSK, NOK, OSG, SONC, TK, VLCM, WBD)

Administrator — Wed, 15 Sep 2010 12:42:29 +0000

These are some of the top analyst research calls for upgrades, downgrades, and initiations this Wednesday morning on Wall Street:

Arena Pharmaceuticals, Inc. (NASDAQ: ARNA) Cut to Market Perform at BMO.
ARM Holdings plc (NASDAQ: ARMH) Cut to SELL at Execution Noble (Overseas).
DryShips Inc. (NASDAQ: DRYS) Started as Market Perform at Wells Fargo.
General Maritime (NYSE: GMR) Started as Outperform at Wells Fargo.
GlaxoSmithKline (NYSE: GSK) Cut to Hold at Jefferies.
Nokia Corporation (NYSE: NOK) Reiterated Overweight at JPMorgan.
Overseas Shipholding Group (NYSE: OSG) Started as Outperform at Wells Fargo.
Sonic Corporation (NASDAQ: SONC) Cut to Hold at KeyBanc.
Teekay Corporation (NYSE: TK) Started as Outperform at Wells Fargo.
Volcom Inc. (NASDAQ: VLCM) Started as Buy at Jefferies.
Wimm-Bill-Dann Foods (NYSE: WBD) Started as Buy at Citigroup.

JON C. OGG

Filed under: Analyst Calls Tagged: ARMH, ARNA, DRYS, GMR, GSK, NOK, OSG, SONC, TK, VLCM, WBD

Top Analyst Upgrades & Downgrades (NLY, APA, STD, GMR, GILD, GS, HOG, WFR, STX, SQNM, SFL, STT, YHOO)

Administrator — Wed, 21 Jul 2010 12:24:11 +0000

These are some of this Wednesday’s top analyst upgrades, downgrades, and initiations seen from Wall Street research calls:

Annaly Capital Management, Inc. (NYSE: NLY) Raised to Outperform at FBR.
Apache Corp. (NYSE: APA) Raised to Sector Perform at Scotia.
Banco Santander, S.A. (NYSE: STD) Cut to Hold at Citigroup.
General Maritime (NYSE: GMR) Raised to Overweight at JPMorgan.
Gilead Sciences Inc. (NASDAQ: GILD) Cut to Hold at Citigroup.
Goldman Sachs Group Inc. (NYSE: GS) Raised to Outperform at KBW.
Harley-Davidson, Inc. (NYSE: HOG) Raised to Equal-Weight at Barclays.
MEMC Electronic Materials Inc. (NYSE: WFR) Raised to Buy at Kaufman Bros.
Seagate Technology PLC (NASDAQ: STX) Cut to Hold at Brean Murray; Reiterated Buy at Needham.
Sequenom Inc. (NASDAQ: SQNM) Raised to Buy at Ladenberg Thalmann; Started as Hold at Jefferies.
Ship Finance International Limited (NYSE: SFL) Cut to Underweight at JPMorgan.
State Street Corp. (NYSE: STT) Raised to Buy at Stifel Nicolaus.
Yahoo! Inc. (NASDAQ: YHOO) Cut to Hold at Citigroup.

JON C. OGG

Filed under: Analyst Calls Tagged: APA, GILD, GMR, GS, HOG, NLY, SFL, SQNM, STD, STT, STX, WFR, YHOO

Top 10 Analyst Upgrades & Downgrades (AMED, BNI, CMCSA, CSX, DCP, FISV, GMR, HLS, STJ, TWC)

247wallst — Wed, 26 Aug 2009 11:45:37 +0000

These are ten of the top pre-market analyst upgrades, downgrades, and initiation calls we have seen from Wall Street early this Wednesday morning with close to two hours until the market opens:

Amedisys (AMED) Cut to Neutral at UBS.
Burlington Northern Santa Fe (BNI) Started as Outperform at Baird.
Comcast (CMCSA) Started as Overweight at JPMOrgan.
CSX (CSX) Started as Outperform at Baird.
Dyncorp (DCP) Started as Buy at SunTrust.
Fiserv (FISV) Started as Buy at Citigroup.
General Maritime Corp. (GMR) Raised to Outperform at FBR.
HealthSouth Corp. (HLS) Started as Outperform at Baird.
St. Jude Medical (STJ) Raised to Outperform at Wells Fargo.
Time Warner Cable (TWC) Started as Overweight at JPMorgan.

JON C. OGG

Posted in Analyst Calls Tagged: AMED, BNI, CMCSA, CSX, DCP, FISV, GMR, HLS, STJ, TWC

Top Analyst Upgrades (ADBE, ALGT, AXP, DRIV, GMR, MSFT, NFLX, OMTR, CRM, SYMC)

247wallst — Tue, 07 Apr 2009 11:52:19 +0000

These are some of the top analyst upgrades or positive initiations we have seen early this morning with about two hours until the open:

Adobe Systems (ADBE) Raised to Outperform at RBC.
Allegiant Travel (ALGT) Started as Overweight at Barclays.
American Express (AXP) Raised to Hold from Sell at Citigroup.
Digital River (DRIV) Raised to Outperform at RBC.
General Maritime (GMR) Raised to Overweight at JPMorgan.
Microsoft (MSFT) Raised to Outperform at RBC.
Netflix (NFLX) Started as Overweight at Thomas Weisel.
Omniture (OMTR) Raised to Outperform at RBC.
Salesforce.com (CRM) Raised to Outperform at RBC.
Symantec (SYMC) Raised to Outperform at RBC.

JON C. OGG

Posted in Analyst Calls Tagged: ADBE, ALGT, AXP, CRM, DRIV, GMR, MSFT, NFLX, OMTR, SYMC

Top Pre-Market Analyst Downgrades (ABX, COGT, GMR, GG, NEM, NAT, PRU, UBS, X, WOR)

247wallst — Mon, 22 Dec 2008 07:54:03 +0000

These are some of the top pre-market analyst downgrades we have seen early this Monday morning:

Barrick (ABX) Cut to Neutral at UBS.
Cogent (COGT) Cut to Neutral at JPMorgan.
General Maritime (GMR) Cut to Neutral at JPMorgan.
Goldcorp (GG) Cut to Neutral at UBS.
Newmont (NEM) Cut to Neutral at UBS.
Nordic American Tanker (NAT) Cut to Underweight at JPMorgan.
Prudential (PRU) Cut to Marekt Perform at FBR.
UBS (UBS) Cut to Neutral at Merrill Lynch.
US Steel (X) Cut to Hold at Deutsche Bank.
Worthington (WOR) Cut to Underperform at CIBC.

Jon C. Ogg
December 22, 2008

Posted in Analyst Calls Tagged: ABX, COGT, GG, GMR, NAT, NEM, PRU, UBS, WOR, X

Early Bird Analyst Upgrades (AEO, BPL, GMR, ITRI, PNR, TCK, URBN)

247wallst — Thu, 23 Oct 2008 06:32:45 +0000

These are some of the top analyst upgrades we are seeing from Wall Street firms this Thursday morning with more than two hours to the open:

American Eagle (AEO) Started as Outperform at Oppenheimer.
Buckeye Partners (BPL) Raised to Neutral from Sell at Goldman Sachs.
General Maritime (GMR) Raised to Overweight at JPMorgan.
Itron (ITRI) Raised to Overweight at JPMorgan.
Pentair (PNR) Raised to outperform at Baird.
Teck Cominco (TCK) Raised to Buy at Goldman Sachs.
Urban Outfitters (URBN) Started as Outperform at Oppenheimer.

Jon C. Ogg
October 23, 2008

Posted in Analyst Calls Tagged: AEO, BPL, GMR, ITRI, PNR, TCK, URBN