Scorpio Bulkers To Offload Ultramax Vessels For $67M; Street Sees 36% Upside

Scorpio Bulkers announced an agreement with an unaffiliated third party to sell some of its Ultramax bulk carriers, including SBI Bravo, SBI Antares, SBI Hydra, and SBI Maia, for about $67 million. The shipping company expects to deliver the vessels in the first quarter of 2021. Shares closed 4.1% higher on Friday.

Scorpio Bulkers (SALT) said that it “has recently sold six vessels and has contracted to sell eleven additional vessels, two of which are expected to close in the fourth quarter of 2020 and nine of which are expected to close in the first half of 2021.” After the completion of the sales, the company “will have an operating fleet of 37 vessels consisting of 32 wholly-owned or finance leased drybulk vessels (including 8 Kamsarmax vessels and 24 Ultramax vessels), and five time chartered-in Kamsarmax vessels.”

Last month, Scorpio Bulkers reported mixed 3Q results, wherein the company reported a loss of $1.45 per share, versus analysts’ expectations for a loss of $1.21. However, its 3Q revenues of $46.7 million topped the Street estimates of about $45 million. (See SALT stock analysis on TipRanks)

On Oct. 22, Cleaves Securities analyst Joakim Hannisdahl lowered his price target to $17 (0.7% upside potential) from $20 due to discount vessel sales. However, he maintained a Buy rating on the stock “based on our positive stance towards the dry bulk shipping market.” He also said, “We maintain our focus on the dry bulk shipping activities of SALT where we are optimistic for slow and steady improvements until at least 2023E.”

Currently, the Street has a bullish outlook on the stock with a Strong Buy analyst consensus. The average price target stands at $23 and implies upside potential of about 36.2% to current levels. Shares have declined by about 73.5% year-to-date.