Capital Product Partners shares fall on downgrade; analyst cites weak tanker market, cash woes

Capital Product Partners shares fall on downgrade

NEW YORK — Shares of Greek oil tanker operator Capital Product Partners LP slipped Monday after an analyst downgraded the stock, saying the company’s revenue will suffer as it renews contracts for a number of its vessels amid plummeting rates and ship values.

Raymond James analyst Darren Horowitz cut the stock to “Underperform” from “Outperform.” He said he expects the partnership’s cash flow to be hit significantly as it looks to put 8 of its 18 vessels under new contracts though 2010.

He said the market is now seeing “the worst fundamentals experienced in recent history.” Horowitz said he expects the market might get even worse later this year and early in 2010 as a number of new vessels are scheduled to be delivered.

“Overall, we are cognizant that a more flexible capital environment and stabilizing global economy may act to firm crude/refined product tanker fundamentals over time,” he wrote in a client note. “However, the limited visibility as to the timing/magnitude of a recovery and the current fundamental outlook extrapolated across Capital Product Partners’ income statement into 2010 suggests a more cautious approach.”

One bright spot, though, is that Capital Product Partners has no investment commitments for the rest of this year, he said.

Shares dropped 81 cents, or 7.7 percent, to $9.73 in afternoon trading. The stock has traded between $5.21 and $17.94 in the past year.