Earnings Preview : Diana Shipping (NYSE: DSX), Q4 2009
Monday, February 22, 2010 9:36 AM

(By Tim) Diana Shipping Inc. (NYSE: DSX) will release the company‘s earnings for the 2009 4th quarter and year-end on February 23, 2010 before market open. A conference call to discuss the results will be held at 9:00 AM that day.

The consensus 4th quarter earnings estimate for DSX is 34¢ on estimated revenues of $56.6 million. The different estimates from the analysts range from a low of 29¢ to a high of 37¢ and the range on revenue guesses is $53 million to 59.4 million. In the fourth quarter of 2008 Diana Shipping earned 72¢ per share on revenues of $84.34 million.

Diana Shipping is an owner of approximately dry bulk vessels. The company leases out the vessels on fixed contracts that pay a set rate for the use of the ships. Out of the lease revenues the compay must pay operating expenses for the ships plus any loan interest and principal payments. When the market is functioning well, own ships is a very profitable business with 60% or more of the revenues dropping straight to the bottom line.

Diana Shipping, like the rest of the shipping industry, was growing rapidly in the 5 years before the financial and economic crises that reached a peak in late 2008. The shipping companies were buying new ships with borrowed money and leasing them out at ever increasing rates. At one point in time, the large Capesize dry bulk vessels would charter for well over $100,000 per day while the operating expenses and financing costs were in the neighborhood of $20,000 per day. Nice business! With the economic crisis, the demand for ocean shipping dropped significantly, many ships were idled, the rates the shipping companies could earn were slashed and the banks were threatening to take control of ships.

During the prosperous years, Diana Shipping had rewarded shareholder with rapidly growing quarterly dividends. The quarterly payout went from around 40¢ per share in early 2006 to 95¢ in the 3rd quarter of 2008. Then, to shareholder dismay, the company completely ceased paying any distributions to conserve cash and attempt to pay down debt. Unlike some of its competitors, however, DSX has managed to stay profitable at a lower level of revenues and has not issued a bunch of new equity to pay down debt.

Net income for the first three quarters of 2009 were 46¢, 40¢ and 34¢ per share respectively. Revenues continue to fall as older, high rate charters expire and new ones are signed at the current lower rates. Potential investors should keep an eye on the daily time charter equivalent rate or TCE, which is the average daily charter rate of the company‘s entire fleet. In the 3rd quarter of 2009 the TCE was $32,367. The 4th quarter estimated earnings shows a slight increase from the 3rd. Dry bulk charter rates have not changed significantly since the 3rd quarter, so any increase in earnings will be due to lower interest or operating expenses.



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