Cleaves downgrades Scorpio Bulkers

Cleaves Securities warned investors about New York listed Scorpio Bulkers may report disappointing results for Q1 2020. Furthermore, Cleaves Securities downgraded dry bulk stocks again as weak dry bulk has been on the horizon. According to Cleaves Securities, Scorpio Bulkers is expected to report results that are significantly below consensus estimates. Cleaves Securities’ analyst Joakim Hannisdahl forecast that Scorpio Bulkers will report TCE (Time Charter Equivalent) revenue of $56.7 million in Q4 2019 which is below consensus at $62.4 million. According to Joakim Hannisdahl, low fleet utilization of 89% due to scrubber installations and predict average gross realized TCE (Time Charter Equivalent) across the fleet at $10,617 per day.

In October 2019, Scorpio Bulkers’s guidance was that 50% of Q4 2019 kamsarmax bulk carrier days had been fixed at $14,083 per day and 39% of ultramax bulk carrier days were fixed at $13,450 per day. After Scorpio Bulkers’s guidance, spot rates fell considerably at the end of the year and Cleaves Securities believe that latest sharp fall in the chartering rates is not fully reflected in current consensus estimates. Besides, due to higher costs, Cleaves Securities predict an earnings per share of negative $0.11 versus consensus at $0.02. Furthermore, Cleaves Securities is also noticeably below consensus in Q1 2020 earnings estimates. According to Joakim Hannisdahl, an offsetting factor could be another special dividend of shares in Scorpio Tankers.

Scorpio Bulkers owns 4.4 million shares in Scorpio Tankers, which valued at $162 million constitutes 37% of Scorpio Bulker’s NAV (Net Asset Value). According to Joakim Hannisdahl, dry cargo bulk carrier earnings and ship prices will remain depressed in the coming months of 2020 due to the weak dry bulk demand and largest fleet growth in Q1 2020 since 2016.