In a new report, analysts at Jefferies upgraded Eagle Bulk Shipping EGLE 2.85% from Hold to Buy based on the terms of the company’s recently-announced new agreement with Korea Line Corp with respect to twelve vessels chartered to Korea Line Corp. Analysts believe that the terms of the new deal lock-in long-term contracts under terms that allow for even greater upside than the terms in previous deals.
Minor Adjustments
Of the 13 vessels that Eagle currently charters to Korea Line Corp, the new agreement adjusts the terms concerning 12 of the vessels. The new agreement includes a floor rate of $17,000 per day on the dozen vessels plus 50 percent profit sharing over $21,000 per day through December 2018.
The previous terms for the vessels included a floor rate of $18,500 per day through mid-2016 plus $18,000 per day plus 50 percent profit sharing over $22,000 per day through December 2018.
Sell-off Overdone
Analysts believe that the recent sell-off in Eagle’s stock is overdone and that the new deal with Korea Line Corp could serve as a catalyst for the stock. Eagle shares had been down 12 percent since Korea Line Corp filed for receivership in January of 2011, while Eagle’s dry bulk shipping peer group is down only 1 percent during that same time.
Outlook
Analysts concede that the uncertainty surrounding Eagle’s Korea Line Corp contracts was cause for concern, they believe that the 12 percent fall is not justified and that “EGLE shares should regain some of the recently lost ground.”
In addition to the upgrade Jefferies also raised its price target on Eagle’s stock from $4 to $7.
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