Disappointing 4Q for DryShips

DryShips Inc. ( DRYS - Analyst Report ) declared disappointing financial results for the fourth quarter of 2012. Solid performance by the company’s majority-owned deepwater oil drilling unit OceanRig UDW Inc. ( ORIG - Snapshot Report ) was more than offset by the tepid results of DryShips’ legacy drybulk shipping cargo division and newly formed oil tanker division. Ocean Rig, in which DryShips controls 65% stake, currently has an order backlog of approximately $5.1 billion over the next three years.

As a result of the weak financial performance in the fourth quarter, the stock price of DryShips was down $0.18 (9.1%) to $1.80 in the aftermarket trade on Nasdaq. DryShips currently has a Zacks Rank #3 (Hold).

Quarterly GAAP net loss was $129.9 million or a loss of 34 cents per share compared with $6.2 million or 2 cents per share in the prior-year quarter. However, adjusted (excluding one-time charges) loss per share in the fourth quarter of 2012 was 15 cents, wider than the Zacks Consensus Estimate of a loss of 11 cents per share. Quarterly total revenue of $282.9 million missed the Zacks Consensus Estimate of $299 million and fell 13.8% year over year.

Quarterly total operating expenses were $366 million, up 35.1% year over year. This was mainly due to higher operating expenses for drilling rigs, higher voyage expenses, higher depreciation and amortization charges, and higher vessel impairment charges. Operating loss in the reported quarter was $83.2 million compared with an operating income of $57.3 million in the prior-year quarter. In the fourth quarter of 2012, adjusted EBITDA was $109.5 million compared with $169 million in the prior-year quarter.

At the end of 2012, DryShips had $315.7 million of cash & cash equivalents and $4,241.8 million of outstanding debt on its balance sheet compared with $251.1 million of cash and cash equivalents and $4,241.8 million of outstanding debt at the end of 2011. At the end of 2012, debt-to-capitalization ratio was 0.52 compared with 0.49 at the end of 2011.

Drybulk Carrier Segment

The Drybulk carrier segment generated $40.8 million in revenue, down 53% year over year. Time charter equivalent revenue was $34.9 million, down 57.2% year over year. Time charter equivalent TCE was $10,547, down 58.3% year over year. Total voyage days per fleet were 3,312, up 2.7% year over year.

Oil Tanker Segment

The Tanker segment generated $12.4 million in revenue, up 216.7% year over year. Time charter equivalent revenue was $6.5 million, up 77.6% year over year. Time charter equivalent TCE was $10,062, down 0.2% year over year. Total voyage days per fleet were 644, up 77.9% year over year.

Offshore Drilling Segment

Quarterly revenue from Drilling contracts was approximately $229.8 million, down 3.5% year over year.

Other Stocks to Consider

Other stocks to consider in the shipping industry are Kirby Corp. ( KEX - Snapshot Report ) and Tsakos Energy Navigation Ltd. ( TNP - Snapshot Report ) . Both the companies handily beat the Zacks Consensus Estimates in the most recent quarter. These stocks currently have a Zacks Rank #2 (Buy).