Zacks Analyst Blog Highlights: DryShips, Diana Shipping, Genco Shipping & Trading, Excel Maritime Carriers and Bristol-Myers Squibb Company

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Jan 05, 2011, 02:43 ET

CHICAGO, Jan. 5, 2011 – Zacks.com Analyst Blog features: DryShips Inc. (Nasdaq: DRYS), Diana Shipping Inc. (NYSE: DSX), Genco Shipping & Trading Ltd. (NYSE: GNK), Excel Maritime Carriers Ltd. (NYSE: EXM) and Bristol-Myers Squibb Company (NYSE: BMY).

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Here are highlights from Tuesday's Analyst Blog:

DryShips Wins Drilling Contracts

DryShips Inc. (Nasdaq: DRYS) is gradually converting itself as an ultra-deep water drilling company rather than continuing as a simple drybulk cargo operator. Today, the company announced that two drillships of its subsidiary Ocean Rig UDW Inc. have entered into a definitive agreement with Cairn Energy plc for a period of six months. These drillships are "Leiv Eiriksson" and "Ocean Rig Corcovado."

Total contract value for the "Leiv Eiriksson" including mobilization charge is around $95 million whereas total contract value including mobilization and winterization of the "Ocean Rig Corcovado" is approximately $142 million.

DryShips is steadily transforming itself as a drillship company from a drybulk cargo operator. Therefore, both the top line and bottom line are benefiting from lucrative ultra deep-water oil drilling industry.

The company announced that the rates for ultra deepwater rigs have bottomed out in the third quarter of 2010. This leads to a more favorable scenario and the demand for drilling rig is expected to surpass supply in 2011.

Last September, the company received its first contract for the four newbuilds drillships. DryShips won a $135 million contract from a U.S.-based oil company to explore energy off the coast of West Africa for 300 days for its first newbuild drillship. The initial contract was to drill four wells of Vanco Overseas Energy.

Last October, the company gets an extension of this contract. The extension will add another well for drilling for a total contract size of $160 million. The project is expected to commence in the first or second quarter of 2011. DryShips further stated that this contract may be extended for another year.

DryShips has a substantial portion of its fleet fixed under time charter contract, locking in sizeable cash flows that enhance the stability of its earnings base. For 2011, almost 80% of drybulk fleets are fixed at $37,000 per day.

For 2012, almost 40% of drybulk fleets are already fixed. The company continues with its fleet renewal and expansion strategy in the drybulk sector, replacing older tonnage with newer and larger vessels.

We maintain our long-term Neutral recommendation on DryShips. Drybulk shipping industry is highly competitive and fragmented, and hence any individual operator controls very little pricing power in the market. Therefore, we currently maintain a short-term Zacks #3 Rank (Hold) on the stock. Major competitors of DryShips are Diana Shipping Inc. (NYSE: DSX), Genco Shipping & Trading Ltd. (NYSE: GNK), and Excel Maritime Carriers Ltd. (NYSE: EXM).

Bristol-Myers Outlook Mixed

We remain Neutral on Bristol-Myers Squibb Company (NYSE: BMY) with a price target of $28.00.

Bristol-Myers, headquartered in New York, is a major producer and distributor of pharmaceuticals and other healthcare-related products. The company manufactures and sells branded pharmaceutical drugs such as Pravachol for cholesterol reduction, Plavix for hypertension and Erbitux for cancer.

In late 2009, Bristol-Myers sold its interest (83.1% stake) in infant formula maker Mead Johnson. The divestiture has enabled Bristol-Myers to operate as a fully independent biopharmaceutical company, focusing exclusively on its Pharmaceuticals segment.

Bristol-Myers has a number of new franchises that should help contribute to its top-line over the next several years. The virology franchise at Bristol-Myers performed impressively in the most recent quarter with worldwide sales from this franchise registering 8% growth.

The impressive performance of the franchise was due to strong demand for HIV drugs Reyataz and Sustiva and Baraclude, one of the top prescribed therapies for hepatitis B virus (HBV), both in the US and internationally.

Furthermore, sales of rheumatoid arthritis drug Orencia stood at $184 million in the most recent quarter, up 14%, while leukemia drug Sprycel registered sales of $144 million in the third quarter of 2010, up 35%. The impressive product portfolio should continue driving growth in the coming quarters.

In October 2010, the portfolio at Bristol-Myers was further boosted when the US Food and Drug Administration (FDA) expanded Baraclude's label for treating adults suffering from chronic hepatitis B with decompensated liver disease. Moreover, the FDA approved Sprycel as a first-line therapy for adults newly diagnosed with chronic myeloid leukemia.

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