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
