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We maintain our long-term Neutral recommendation on Excel Maritime Carriers Ltd. ( EXM - Analyst Report ) ahead of its third quarter fiscal 2012 financial results. The company has delayed to declare its third quarter results. Meanwhile, the stock price has plummeted over 80% over the last year. This is primarily due to the bleak prospects of the drybulk shipping industry. This sector has been facing serious challenges ever since the spot vessel rates collapsed drastically. Currently, Excel Maritime holds a short-term Zacks #3 Rank (Hold) on the stock.
We attribute the dismal condition to a sheer increase in the number of vessels under operation resulting in intense price competition. The spot rates of drybulk vessels have fallen to such a low level that even surging demand for commodities in the Asian markets have failed to offset the losses incurred by the vessel owners. Consequently, voyage revenue declined significantly. However, we believe this low level of valuation may provide a cushion for further downslide of the stock price.
The drybulk shipping industry is going through difficult times. The financial condition of this industry is even worse than what it was before the recession. This is mainly attributable to the foolhardy decision taken by the shipping companies in 2008, just before the beginning of the worldwide recession. Due to a lack of near-term foresight, most of the vessel operators had ordered a large number of newbuild ships in several docks.
Excel Maritime operates in a highly competitive drybulk shipping industry. The company’s main competitors are Diana Shipping Inc. ( DSX - Snapshot Report ) , Genco Shipping & Trading Ltd. ( GNK - Snapshot Report ) , and DryShips Inc. ( DRYS - Analyst Report ) .
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