Saturday, February 19, 2011

Diana Shipping (NYSE: DSX): Q4 Earnings Preview 2010

Diana Shipping Inc. (NYSE: DSX) is scheduled to release its fourth-quarter earnings before the opening bell on Tuesday, February 22, 2011. Analysts, on average, expect the company to report earnings of 41 cents a share on revenue of $69.33 million. In the year ago period, the company reported earnings of 34 cents per share on revenue of $58.64 million.

Diana Shipping Inc. provides shipping transportation services worldwide. The company specializes in transporting dry bulk cargoes, including such commodities as iron ore, coal, grain and other materials along worldwide shipping routes.

In the preceding third quarter, the Athen, Greece-based company's net income was $33.80 million, or 42 cents per share, compared to a profit of $28.66 million, or 36 cents per share, in the year-ago quarter. Revenue jumped to $71.61 million from $58.22 million. Analysts, on average, expected the company to report earnings of 41 cents per share on revenue of $68.34 million.

The dry bulk shipping industries' fortunes are closely tied to global growth as these ships are responsible for carrying the materials required in economic expansion. However, despite improving global macroeconomic scenario, the financial condition of this industry is worse than what it was a year or two ago. An oversupply of ships and mediocre demand has severely damaged the drybulk industry and has forced companies to search elsewhere for revenues. The traditional indicator of the industry's health, the Baltic Dry Index, has plummeted in 2011 as demand for dry-bulk shipping has fallen alongside commerce levels. The Baltic Dry Index has been on the slide since October. The index has lost more than 70% of its value in the last month or so and having retreated to a 2-year. The index slipped hard in January as flooding in Queensland -- the richest coal producing province in Australia -- shut down mines and curbed volumes of cargo to be delivered. Over that same period, average rates for short-term charters of the largest dry bulk carriers, called "Capesize" ships, have fallen from $46,284 a day to $10,285 in the same period -- a ghastly statistic considering most Capesize ships incur operating costs of at least $15,000 a day.

Diana is mainly focused on the supply of grain and wheat. Diana's fleet is comprised primarily of medium sized vessels. Medium and small sized vessels are used for shipping mainly iron ore, coal, and grains. Over the past few years, Diana's largest customers have been Cargill, BHP (NYSE: BHP), The Australian Wheat board, and China National. According to industry experts, Diana Shipping Inc. is somewhat insulated from the fall-off in rates because it generally deals in longer-term contracts.

The company is now seeking a path out of the doldrums of dry bulk shipping, their main business. Diana has increased some of its emphasis on containerships. The company recently spinned off 80% of its 55% interest in its subsidiary Diana Containerships Inc.

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