Tickers in this Article: CKH, HRZ, ALEX, TGP, TOO, TK
Investors are well aware that there's too little demand and too much supply when it comes to over-the-road shipping right now. (For more check out Trucking Stocks Still Down.) Marine shipping stocks, however, didn't seem to be dealing with the same worries from investors after last week's earnings news. The problem? These companies aren't actually seeing smooth sailing just yet despite the buying interest.

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Here's a closer look at some of them, but a brief teaser....this article is going to end up making a point more about future demand and pricing than it is about results.

Numbers Don't Lie
SEACOR Holdings Inc.
(NYSE:CKH) got the ball rolling on Wednesday by reporting income of $1.91 per share. That was better than 2008's Q2 earnings per share (EPS) of $1.57. Revenue was down a little. The market was looking for around $2.00 per share according to estimates. Still, with a twelve-month earnings multiple of 7.9, SEACOR's got nothing to be ashamed of.

The Teekay Corporation (NYSE:TK) family of partnerships was also busy posting results, though only from the first quarter of the year. Teekay LNG Partners (NYSE:TGP), the master limited partnership formed by Teekay Corp., upped its Q1 cash flow by 26%, though mostly due to acquisitions.

Teekay Offshore Partners (NYSE:TOO), which controls Teekay Offshore Operating L.P., drove a 47% increase in cash flow, again mostly through acquisitions. (These unique investments provide significant tax advantages, see Discover Master Limited Partnerships.)

Horizon Lines, Inc. (NYSE:HRZ) announced it had - after removing one-time accounting charges - generated $0.13 per share last quarter. That was less than the $0.28 per share earned (on an operating basis) in the second quarter of 2008. Revenue was off by 16%.

And finally, Alexander & Baldwin Inc. (NYSE:ALEX) fell short on the earnings front by making $0.31 per share last quarter, down from the EPS of $0.71 in the same quarter a year earlier. Still, it topped analyst's expectations of 21 cents per share. Revenue was down 23%. Like SEACOR though, the trailing twelve-month P/E of 12.9 is palatable, even if the forward-looking estimates are just so-so.

So why did these marine shipping stocks put up mediocre - and mostly worsening - results? The obvious answer is one of the correct ones; a diminished demand and growing supply has pushed shipping prices lower than they were a year ago. Thus, margins are crimped. There's more to the story though.

What You Really Want to Know Is.....
During the second quarter of last year, the cost of marine shipping (as measured by the Baltic Dry Index) was at all time highs. By the fourth quarter of last year, the Baltic Dry Index was at multi-year lows. Since then the BDI Index (shipping prices) has recovered about half its decline, but clearly a comparison to year-ago numbers are going to be a disappointment.

A recent rise in the Baltic Dry Index certainly has to mean greater demand, limited supply and more profits, right? You'd think so, but no.

Flawed Logic
The Baltic Dry Index - the prices these shippers are charging - should reflect supply and demand, which ultimately leads to earnings (or lack thereof). The truth is, that elevated BDI level simply reflects desperate pricing. The truth is, total cargo shipped (as measured by tonnage and/or a count of cargo containers) is actually down for the year...by a lot.

For example, the Port of Portland (Oregon) says container cargo shipments are down 28.2%, while break-bulk cargo is down 58.2% year-to-date. Horizon reported a 9.8% decline in container volume during its second quarter. Rotterdam's port says cargo container volume is down 15% year o date, while the Port of Charleston (SC) says volume is down 20% for the year do far. (The economy has a large impact on the market. Learn know how to interpret the most important reports, see Economic Indicators To Know.)

Get the idea? Demand didn't actually increase - prices just went higher. That's not a sustainable condition though, which is most likely why the BDI has fallen from $4291 in early June to $3335 late last week.

And, if the demand just isn't there, then shippers like Horizon, Teekay and A&B won't even be able to maintain prices at that level. Factor in the growth in marine shipping capacity (supply) we've seen since the decline in demand and it's no surprise we're seeing the above stocks wallow in mediocrity. It could be years before demand actually arches up with supply. The only exception to the trend seems to be India but even they can't offset everyone else's dried up activity.

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