Once the darling of the equity market, the dry bulk shipping industry has shrunk away into relative obscurity. Prior to the Great Recession, stocks in this industry were among the most sought after stocks in the market. They offered steady income through hefty dividends and profited from an expanding world economy.
But as the recession became entrenched these stocks were beaten and bruised. Among the easiest ways to measure the overall strength of this industry is the Baltic Dry Index. The BDI calculates the average shipping rate across 23 different routes and four separate sized ships. As the BDI goes, so goes stocks in this industry. Good news is, the BDI is beginning to climb again. It’s a cyclical index that tends to go up during the warm summer months.
As a result, things are beginning to heat up for my Bull of the Day Tsakos Energy Navigation (TNP). Tsakos is a Zacks Rank #1 (Strong Buy) with Style Scores of “C” for Growth, and “A” for Value and Momentum. Tsakos Energy owns several ships including 21 crude oil tankers and 29 clean/product tankers. The company also has 13 ships under construction expected to be completed by 1Q2017.
Last quarter, Tsakos surprised earnings to the upside by 6 cents, coming in at 42 cents per share versus the Zacks Consensus Estimate of 36 cents. This came on the heels of a 7 cent beat for the quarter ending 12/2014. That’s part of the reason for our favorable Zacks Rank.
Another large part of the reason is the recent earnings estimate revisions to the upside. Over the last sixty days, five analysts have increased their earnings estimates for the current quarter and for the current year. The bullish sentiment has pushed up our Zacks Consensus Estimate from 19 cents per share to 35 cents for the current quarter and up from $1.02 to $1.41 for the current year.
This bullish sentiment has spread to investors as the chart has been breaking out recently. After bottoming out at $4.75 in mid-October the stock rebounded nicely, reaching a high of $8.47 in January. That level served as a firm top on the stock until a fierce rally in April pushed the stock past it. Since then, shares have tracked above the 21 day moving average for the most part. An overbought Commodity Channel Index remained for much of the rally until a recent dip below the zero line broke up the longer term trend.
A fresh 52-week high three days ago was met with a fast and furious retrace lower. Volume has been about average and buyers came in on Friday to pick up shares put on a discount by Thursday’s sell off. A pop back up above the zero line for the Commodity Channel Index would confirm the re-establishment of the long term bullish trend.
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