DryShips Falls Short of Estimate

Yesterday after market close, DryShips Inc. (DRYS) declared financial results for the fourth quarter of 2010 that lagged behind the Zacks Consensus Estimates. The core drybulk voyage segment continues its downtrend. However, renewed oil rig contracts boosted year-over-year profit. In the after market trade on NASDAQ, stock price of DryShips was up 5 cents (1.01%) to $4.98.

Quarterly GAAP net income was $99.7 million or 29 cents per share compared with a net income of $9.6 million or 2 cents per share in the prior-year quarter. However, in the reported quarter, DryShips gained $16.7 million as one-time special items. Excluding these items, fourth quarter of 2010 adjusted EPS came in at 24 cents, well below the Zacks Consensus Estimate of 26 cents.

Quarterly total revenue was slightly above $215.8 million, up 9.9% year over year but failed to meet the Zacks Consensus Estimate of $222 million. Quarterly Voyage revenue was $113.5 million, down 4.9% year over year. Revenue from Drilling contracts was over $102.3 million, up 32.7% year over year. Quarterly Time charter equivalent revenue (Voyage revenue less Voyage expense) was $106.7 million, down 4.8% year over year.

Quarterly total operating expenses were $137.2 million, down 15.2% year over year. This was mainly attributable to lower voyage expense, vessel operating expense and depreciation and amortization charges, partially offset by higher drilling rig operating expense. Operating income, in the fourth quarter of 2010, was $78.6 million, up 127.2% year over year.

In the fourth quarter of 2010, adjusted EBITDA (which excludes gain/loss from interest rate swaps) was $129.3 million, a considerable improvement over the prior-year quarter adjusted EBITDA of $76.7 million.

At the end of fiscal 2010, DryShips had $391.5 million of cash & cash equivalents and $2,719.7 million of outstanding debt on its balance sheet compared with $693.2 million of cash & cash equivalents and $2,684.7 million of outstanding debt at the end of fiscal 2009. At the end of fiscal 2010, debt-to-capitalization ratio was 0.34 compared with 0.26 at the end of fiscal 2009.

Operating Metrics

In the fourth quarter of 2010, average numbers of vessels of DryShips were 37.0 compared with 39.0 in the prior-year quarter. Quarterly total voyage days for vessels were 3,341 compared with 3,535 in the year-ago quarter. Total calendar days for vessels were 3,404 compared with 3,588 in the year-ago quarter. Quarterly Fleet utilization was 98.1% compared with 98.5% in the year-ago quarter. Time charter equivalent TCE was $31.929 million compared with $31.683 million in the prior-year quarter. Vessel operating expense (daily) was $5,577 compared with $5,553 in the prior-year quarter.


DryShips fiercely competes with other drybulk carriers, such as Diana Shipping Inc. (DSX) and Excel Maritime Carriers Ltd. (EXM). We are maintaining our long-term Underperform recommendation on DryShips. Currently, it holds a short-term Zacks #4 Rank (Sell) on the stock.

DRYSHIPS INC (DRYS): Free Stock Analysis Report

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