Eagle Bulk Shipping Inc.EGLE

Morningstar Rating

Stock Research and Analysis

by Adam Fleck

Eagle Bulk Shipping owns and operates the largest fleet of smaller Handymax vessels among U.S.-listed shipping firms. However, considerable supply growth across the industry is likely to threaten pricing as the firm renegotiates contracts over the next several years. Read more

Bulls Say

Eagle's smaller Handymax ships can operate in lesser ports that are incapable of accepting larger ships.

With a fleet of similar-size ships, Eagle's crew can move easily among its vessels.

Eagle's contracted fleet expansion should increase its available operating days by more than 200% during the next five years. Read more

Bears Say

Weakness among dry-bulk customers could lead to substantial legal fees or early cancellation payments that are less valuable than the original rental agreement if contracts are canceled.

The backlog of dry-bulk ships on order may threaten the industry's current high level of vessel utilization. This potential oversupply would lead to weaker overall freight rates.

Improvements and upgrades to the smaller ports Eagle services could bring in larger ships, limiting Eagle's niche.

Eagle's balance sheet is highly leveraged. Mismanagement of future growth or less cash flow than we expect could lead to solvency issues.

Some of Eagle's upcoming vessel deliveries will enter the volatile spot market, increasing the company's risk profile. Read more

Strategy

For the operation of its fleet, Eagle opts to use outside vessel management, a common industry practice. Although the company must pay a small fee for these services (typically 1%-2% of sales), it shifts technical and crewing risk to the managing firm. Read more

Management

CEO Sophocles Zoullas and CFO Alan Ginsberg both hold more than 20 years of shipping experience. We like that Zoullas owns a great deal of Eagle shares and that management's compensation is mostly in equity payments. However, we are less than thrilled with Eagle's takeover defenses, which include a large payout for Zoullas and a staggered board. Read more

Profile

Based in New York but incorporated in the Marshall Islands, Eagle Bulk Shipping owns the largest fleet of Handymax vessels among U.S.-listed shipping companies, with nearly 20 ships on the water and more than 30 on order. Read more

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