TBS International: Looking Back or Looking Forward?

5/7/2009 7:15 AM EDT

Yesterday, after the markets closed, the dry-shipper TBS International (TBSI) reported its earnings. I've previously been bullish on the stock and said that I would be continuing to hold it through earnings and beyond. That's still the case. The results were disappointing and the stock dropped as much as 23% in the after-hours session.

Yet, here are some things worth remembering if you own the stock and are wondering what to do today given these results:

- The earnings estimates which TBSI "missed" on were an average of 2 wildly divergent analysts. One was very bullish and one very bearish. TBSI missed the average of the two for EPS, but actually beat ($72MM vs. $62MM) for top-line revenues. It's also clear that the bullish analyst who kept his estimate of a $0.43 EPS quarter clearly didn't listen to the TBSI Q4 call on April 1st where they specifically projected a loss (on target with the numbers they delivered) for the quarter. If that analyst had properly taken down his estimates (as the other analyst did), these numbers would actually have been a "beat."

- The stock price ended up last night's AH session at $9.93 -- or about where it last traded on Monday at 10am. It's had a heck of a run this week.

- The after-hours session traded about 10% of TBSI's daily volume. Any highs or lows in the pre-market or after-market sessions around earnings must be taken with a grain of salt; moreso with a smaller-cap company like TBSI.

- The company won't hold its earnings call until later this morning at 10am ET. Therefore, all the action in the AH is based on the earnings press release which is 95% backwards-looking to the results of the last quarter. There were only a couple of sentences in the press release looking to the current quarter and these were positive, saying that there was evidence of renewed (but still early) growth in their business. It's not uncommon to see a stock price perk up as management talks more positively with more color commentary during the call in market hours (if they do).

- I would be surprised if the market didn't focus more on the forward-looking comments of TBSI management today and only focused on that last quarter's numbers. That would really be a first for this earnings season, given what we've seen with casinos, financials, and others. I also find it hard to believe that TBSI isn't benefitting from the same trends DryShips (DRYS) said they were when they talked last week.

- The simple truth is that TBSI and other dryshippers see their stock prices trade in close proximity to the Baltic Dry Index (BDI). If that keeps going up over the next week, as it has been in response to the good news coming out of China, TBSI and the other shippers will see their stock prices increase and these earnings numbers will matter little. Remember in mid-March when TBSI warned of needing to discuss debt covenants with their bankers and the stock dropped sharply on the news to $5.09? Six trading days later, its stock price hit $7.24 -- or a 42% increase in about a week.

Obviously, we don't have crystal balls here, but it's important to keep everything in perspective. It's my view that China is on the track now to growing its industrial production slowly and surely in the months ahead, which should also carry over to some other emerging economies like India. As that happens, I expect the BDI to track slowly and surely upwards. That's why I will keep holding TBSI and why I think the shippers will continue to do well.

Position: Long TBSI.

Originally published in RealMoney.com

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Best Way to Play Dry-shippers: TBSI

An upgrade by Oppenheimer to DryShips (DRYS) this morning has sent that stock and the rest of the dry-bulk shippers flying today. DRYS is the big daddy of the space with the most revenues of their peers. It's also had one of the highest debt-loads, which caused it to recently dilute holders through a $500MM equity offering. With the fresh new capital raised, and today's upgrade, DRYS has been off to the races - recently trading up 26%.

The fact is the whole dry-shipper space is a good buy -- unless you believe the world is going really dark for a while. Stocks such as Eagle Bulk (EGLE), Diana (DSX), Genco (GNK), Excel Maritime (EXM), and FreeSeas (FREE) are all good values here and most pay good dividends. They've all gone through a vicious sell-off and stabilized a few months ago. Now, any hints of strength in commodities in China or India and these stocks all tick higher. (If you can't stand super-high beta stocks: avoid these.)

The big cloud hanging over the sector has been the high levels of debt these companies are carrying and whether they'd be able to renegotiate this. DRYS' ability to raise cash is a bullish sign for the sector (their debt-to-cash ratio had been 10:1 before the new slug of capital came in).

My favorite play in this space is TBS International (TBSI). They operate smaller vessels which they can move around quickly to meet customers' demand. They also have perhaps the most conservative debt-to-cash profile in their industry. They just got out of some commitments to take on new vessels to better control their costs in the current enviornment.

TBSI pays no dividend, because their management reports they need to use it to better follow growth opportunities. Yet, pick any time period over the last couple of years and map TBSI's stock performance against their peers and you'll find TBSI tends to outperform. Their biggest strength, in my view, is their relative valuation. While their peers trade at Enterprise Value-to-EBITDA ratios in the 5s (still cheap), TBSI trades at 1.8x.

Originally published in RealMoney.com on 4/17/2009 3:17 PM EDT

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A Look Into the Micro Crystal Ball

Published in RealMoney.com

By Eric Jackson

12/31/2008 12:00 PM EST

In these final days of 2008, we turn our eyes to next year and how the stock market will fare. Rather than adding to the chorus of predictions about the price of oil, gold and the dollar -- as well as the S&P 500 in general -- I wanted to offer some predictions that are micro in nature.

1. New York Times (NYT - commentary - Cramer's Take) will be sold to avoid shutting down. The sales of its Boston properties, cutting of its dividend and mortgaging of its headquarters will not be enough to refinance its debt in 2009. The Times will be forced to seek out a friendly purchaser, more likely to be Mort Zuckerman, Eli Broad, Terry Semel or Ron Burkle than Rupert Murdoch because of News Corp's (NWS - commentary - Cramer's Take) own financial challenges.

2. Yahoo! (YHOO - commentary - Cramer's Take) will appoint an inside board member as CEO by the end of February (either Gary Chapple, Maggie Wilderotter or V.J. Joshi), which will be panned by the business media and employees as uninspiring. Current President Sue Decker will immediately leave the company and take a job later in the year working for Warren Buffett at Berkshire Hathaway (BRK.A - commentary - Cramer's Take). Microsoft (MSFT - commentary - Cramer's Take) and Yahoo! will announce a friendly "merger" by the end of the summer.

3. Terry Semel will buy a media property through his investment firm and effectively run it (a la Sam Zell). After all the bad press from his days at Yahoo!, Semel won't be content to stay on the sidelines.

4. CBS (CBS - commentary - Cramer's Take) will be spun off from Sumner Redstone's control and Les Moonves will be removed as CEO. Redstone's debt restructuring talks with the banks will force him to jettison his stake in CBS and hang on instead to Viacom (VIA.B - commentary - Cramer's Take). The network will be sold to another media company and Les Moonves will immediately move on. Home Depot (HD - commentary - Cramer's Take) cofounder Ken Langone will be among the new owners of the company.

5. Howard Stern will announce he's not re-signing with Sirius (SIRI - commentary - Cramer's Take) and instead retire; Sirius will restructure through Chapter 11 with Mel Karmazin staying on. Disappointed in his lack of influence as part of Sirius, Stern will throw in the towel and announce he's retiring after his five-year contract ends in 2010. He will stay retired for nine months before announcing he's returning to terrestrial radio.

6. Google (GOOG - commentary - Cramer's Take) will buy geospatial satellite operator GeoEye (GEOY - commentary - Cramer's Take). Google will see providing the map images (and searching any location on Earth) that appear on Google Maps, Google Earth and its G1 mobile phone as strategic, as well as in line with its interest in space in general. Google's stock will end 2009 at $350.

7. Women's retailers will face bankruptcy. Ann Taylor (ANN - commentary - Cramer's Take), Talbots (TLB - commentary - Cramer's Take) and Charming Shoppes (CHRS - commentary - Cramer's Take) will all announce bankruptcy before the summer, as cautious women shoppers stay away from these retailers and tighten their purse strings. Chico's (CHS - commentary - Cramer's Take) will teeter on the edge of bankruptcy but survive the year.

8. Bill Gates' investment firm will orchestrate a takeover of Crocs (CROX - commentary - Cramer's Take) in his first active investment. Faith in the Crocs products, which are used by the Bill & Melinda Gates Foundation with children in Africa, as well as frustration with the current management, will spur Gates into taking over the footwear company.

9. Hugh Hefner will make a lowball offer to take Playboy (PLA - commentary - Cramer's Take) private with several other friendly individual investors after disillusionment in the low stock price. This action will spur interest from a larger foreign investor to buy the company with the promise of letting Hefner continue to run it independently.

10. Dry bulk shippers like DryShips (DRYS - commentary - Cramer's Take) and TBS International (TBSI - commentary - Cramer's Take) will triple in value before June 1 as the general market rallies, before declining 50% in the second half of the year.

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