Overseas Shipholding Group

We are maintaining our Sell recommendation on Overseas Shipholding Group, Inc. (OSG - Analyst Report), and raising our target price to $30. OSG reported first quarter diluted EPS before nonrecurring items of $1.03, above the $1.00 consensus, but below our $1.06 estimate as revenues came in weaker than expected from lower spot tanker rates, partly offset by increased revenue days.

We are slashing our 2009 diluted EPS estimate to a loss of $0.45 per share from earnings of $2.10 per share, as we now believe the impact of the global economic slowdown will be more pronounced than previously expected. We have cut our 2009 revenue assumptions due to reduced estimates for spot market rates (roughly 45% of the company s fleet is exposed to the spot market) and fewer revenue days.

Our initial estimate for 2010 is a $0.05 loss per share. While OSG recently increased its dividend by 40%, we cannot rule out a dividend cut in the event of a protracted economic downturn.