Dorian LPG shares slid about 2% on Thursday despite a significant earnings beat, as it guided to weaker results for the current quarter.
The stock slipped below $40 to a day’s low of $39.83 in morning trading on the New York Stock Exchange even after the company crushed the consensus earnings expectations of Wall Street analysts.
The Connecticut-based gas carrier owner’s earnings per share of $1.26 for the second quarter easily topped the $0.98 tipped by researchers, while Ebitda of $78m trumped analysts’ bet of $64m.
However, investors were probably looking at Dorian’s guidance for rates in the third quarter, which slipped substantially from the time charter equivalent figures from second quarter.
Speaking on their quarterly earnings call, management said about 50% of days have been booked in the quarter at an average of around $30,000 per day.
This is down from a fleetwide TCE rate of $55,228 last quarter, which included a $50,145 figure from its spot Helios pool.
Chief commercial officer Tim Hansen said the primary factor was a reduction of VLGC cargoes out of the US Gulf Coast as a result of damage from Hurricane Beryl in late June and early July. A lesser factor was the unwinding of a short spate of Panama Canal congestion.
The Gulf Coast situation is improving quickly and rates are rising, but it takes time to fully unwind the backlog of vessels, he said.
Analyst Omar Nokta of Jefferies pointed out that Dorian had guided to a $40,000 TCE out of Helios last quarter, only to see the final number at $50,000, suggesting that this quarter’s figure might prove to be similarly conservative.
“It’s really hard to say,” chief financial officer Ted Young responded. “I’d like to think that there’s some upside to that number.”
Much depends on how much of the improved activity cited by Hansen falls into the current quarter as opposed to the next, he said.
Nokta said in a client note after the call that he still considers the $30,000 guidance “conservative” and is modelling a final figure of $35,000 for the quarter.
However, this still caused him to reduce his quarterly earnings expectation to $0.52 per share from $0.75. Current analyst consensus is $1.10.
Nokta nonetheless maintained his “buy” rating on the stock and a $50 price target.
The Jefferies analyst was the only bank researcher to ask questions on the call, and he naturally wanted to know about Dorian’s prospects for fleet expansion/renewal with the $84m raised from a follow-on equity issue in June. The raise was led by Jefferies.
Dorian chief executive John Hadjipateras said: “There’s nothing active at the moment but we’ve been looking at opportunities that we believe could put the money to good use. We’ll keep you apprised when anything comes to fruition.”
