Deutsche Bank Sees 40% Upside In Eagle Bulk Shipping

Eagle Bulk Shipping Inc EGLE is benefiting from positive trends in the dry bulk shipping sector, according to Deutsche Bank. 

The Analyst

Deutsche Bank analyst Amit Mehrotra initiated coverage of the shares of Eagle Bulk Shipping with a Buy rating and $7 price target, suggesting roughly 40-percent upside from current levels.

The Thesis

Deutsche Bank's positive outlook is built on expectations that cash flows will more than double in 2018 and earnings will grow over 20 percent in 2019, Mehrotra said in a Thursday note. (See the analyst's track record here.) 

The growth comes from recent vessel acquisitions and continued improvements in dry bulk rates, the analyst said. 

Eagle Bulk could benefit from management's growth initiatives and its now-simplified capital structure, with no significant debt maturities until 2022, Mehrotra said. 

Deutsche Bank estimates strong double-digit year-over-year growth in the cash flows of dry bulk carriers in 2018, thanks to continued improvement in rates and asset values.

"Dry bulk fundaments have improved dramatically over the last year, with strong financial positions across the industry, accelerating trade growth (4 percent in 2017) and order book at 20-year lows (reflecting limited-to-no ordering during the dry bulk downturn of 2015/16)," Mehrotra said. 

The Price Action

Shares of Ealge Bulk Shipping were down about 18 percent for the year until Wednesday.

Shares were surging 3.75 percent to $5.26 at the time of publication Thursday. 

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