Euroseas Ltd. (
ESEA), incorporated in May 2005, was formed to consolidate the ship-owning interests of the Pittas family of Athens, Greece, which has been in the shipping business over the past 136 years. The company owns and operates drybulk carriers that transport major bulks, such as iron ore, coal, and grains, and minor bulks, such as bauxite, phosphate, and fertilizers.
We are retaining our Hold on Euroseas Ltd., but cutting our target price to $4. In 2008's third quarter, ESEA posted diluted EPS before nonrecurring items of $0.46, up 10% from the $0.42 earned in the prior-year period. Total net revenues of $34.7 million increased 66%, as well as a 30% increase in the average time charter equivalent rate to $25,951 per day from $20,024 per day in the year-ago quarter.
However, spot rates have dropped precipitously (the Baltic Dry Index is at a 22-year low), and about two-thirds of the fleet is exposed to the spot market. As a result, we are reducing our diluted EPS estimates to $1.58 from $1.83 for 2008 and to $0.24 from $1.70 for 2009. The dividend was cut 38%.
