DryShips Earnings on Deck (DRYS)

DryShips, Inc. (NASDAQ: DRYS) is set to report earnings this afternoon.  Calling this one the more volatile stocks in a volatile space would be redundant at a minimum.  While we are cautious in about estimates, Thomson Reuters has a consensus estimates of $0.20 EPS on $210.65 million in revenues for its Q3 period.  And for the Q4 period, those estimates are $0.20 EPS and $215.55 million in revenues.  The real issue at hand will come from the individual metrics.

At 12:30 PM EST stock and options prices, we had penciled in a “options trader expectation” for pricing in a move of up to $0.47 to $0.55 in either direction.  We would note that there is still a lot of time value and that the open interest in these options contracts really seems to be based more around hedging and more around long-term bets than it does around traders using options in a meaningful enough impact to influence real equity trading.  The 3-closest strike prices have a combined open interest in the call options of right at 67,000 contracts, or 6.7 million shares on a fully leveraged basis.  With the stock trading over 23 million shares on average and with the share price being a mere $6.91, we have nothing more to add for options trading insight as it just isn’t a huge factor in our read.

Its chart, however, may be far more important than in other cases.  The 50-day moving average the 200-day moving average have just crossed each other with the 50-day still rising and the 200-day in decline.  The 50-day is $6.56 and the 200-day is $6.53.  In theory, there should be some serious support down at those levels.  But the other notion is that $7.25 to $7.50 has been resistance as well.  The 2008 high was over $100.00, but the 52-week trading range is $2.72 to $80.35.

The individual brokerage firms have also been of little help over the last year on this one.  But there are a few wild cards.  The old exchanges and offerings earlier this year might be very important, but the real long-term wild card is the company’s move into deep-water energy drilling vessels on top of its old mantra of being a pure-play on the drybulk shipping sector.  This adds an entirely new round of metrics for 2011 and 2012, so we will have to wait and see what the company targets for some its longer-dated goals.  We are still waiting to see what these will add to the company on a revenue and earnings basis.

We almost hate using the short interest because new data will be out in the next day.  But at the end of September, the short interest was just over 10.2 million shares.  That is far less than early summer when the company was making its capital raises.

Jon C. Ogg
October 26, 2009