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Kirby (KEX) Q2 Earnings In Line, Down Y/Y on Low Revenues
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Kirby Corporation’s (KEX - Free Report) second-quarter 2020 earnings of 42 cents per share were in line with the Zacks Consensus Estimate. The bottom line plunged 46.8% year over year.
Total revenues of $541.2 million lagged the Zacks Consensus Estimate of $618.4 million and declined 29.8% year over year. The top line was hurt by a decline in revenues at the marine transportation, and distribution and services segments due to coronavirus-induced weak economic conditions.
Segmental Performance
The company through its subsidiaries operates via the segments marine transportation, and distribution and services.
The marine transportation division is responsible for providing transportation services by tank barge to inland and coastal markets. In the second quarter, revenues at the marine transportation unit decreased 5.8% year over year to $381 million. Segmental operating income also dipped 3.4% year over year to $51.4 million. However, operating margin expanded to 13.5% from 13.2% in the year-ago period.
Inland market revenues decreased 2% year over year due to reduced barge utilization and low fuel rebills. The operating margin for the inland business was in the mid-to high teens.
Revenues at the coastal market fell 17% year over year due to reduced spot market activity, retirement of two large capacity vessels and planned shipyard activity. The coastal market recorded break-even operating margin during the quarter.
The distribution and services segment is responsible for selling replacement parts and focuses on the oil and gas, and commercial and industrial markets. Segmental revenues dropped 56.3% to $160.2 million due to below-par performance in the oil and gas market. Moreover, the segment reported a negative operating margin of 8.8% in the reported quarter against 6.3% in the second quarter of 2019.
The oil and gas market was weak during the second quarter due to reduction in oilfield activity and low oil prices. Operating margin for oil and gas came in negative.
In the commercial and industrial market, revenues slipped year over year due to reduced economic activity and disruptions in the on-highway and power generation businesses. The commercial and industrial operating margin was in low single digits in the quarter under review.
Kirby Corporation Price, Consensus and EPS Surprise
Long-term debt (including current portion) for this Zacks Rank #5 (Strong Sell) company increased to $1.64 billion at the end of the second quarter from $1.59 billion at the end of June 2019. Debt-to-capitalization ratio at the end of second-quarter 2020 was 35% compared with 32.4% a year ago.
Outlook
Kirby believes that it has reached the bottom of coronavirus-led weakness in the activity and utilization levels. Lately, the company has been seeing modest improvement in demand. In inland marine, refinery and petrochemical plant utilization rates have improved. However, given the significant softness in economic activity, the company anticipates average barge utilization to be lower sequentially in the third quarter. This in turn is expected to hurt revenues and operating margins. The company estimates inland revenues and operating income to decline sequentially in the current quarter.
Meanwhile, the coastal market is expected to benefit from reduced shipyard maintenance in the third quarter in a challenging spot market. Despite anticipating reduced activity in the coal transportation business, the company expects sequential improvement in third-quarter coastal revenues and operating income. On the whole, Kirby anticipates the coastal business to be stable for the remainder of this year.
With most customers reducing spending for 2020, the oil and gas market’s activity is expected to remain weak, which in turn is likely to weigh on the distribution and services segment’s performance. The commercial and industrial market continues to be plagued by reduced economic activity. Yet, there has been some improvement in the on-highway and power generation businesses. To mitigate the adversities in the distribution and services segment, the company has controlled costs through workforce reductions, furloughs and a strict check on general and administrative expenses. Benefits of these cost reduction initiatives are expected to be better realized in the third quarter. On the whole, the company expects segment operating margins to improve in the third quarter but will still be below break-even levels.
With stringent control, the company estimates capital expenditures to be approximately $150 million in 2020, indicating a year-over-year reduction of roughly 40%. Free cash flow is predicted in the range of $250-$350 million for the current year.
Sectorial Snapshot
Let’s take a look into some other Zacks Transportation sector companies’ second-quarter earnings results.
Canadian National’s (CNI - Free Report) second-quarter earnings (excluding 36 cents from non-recurring items) of 92 cents per share (C$0.77) were in line with the Zacks Consensus Estimate. However, the bottom line declined 28.7% year over year. Quarterly revenues of $2,315 million (C$3,209 million) missed the Zacks Consensus Estimate of $2,407.6 million and fell 21.8% year over year. This company carries a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
J.B. Hunt Transport (JBHT - Free Report) , presently carrying a Zacks Rank #3 (Hold), reported second-quarter earnings of $1.14 per share that surpassed the Zacks Consensus Estimate by 31 cents. Total revenues of $2,145.6 million also beat the Zacks Consensus Estimate of $2,060.9 million.
Kansas City Southern’s second-quarter earnings (excluding a penny from non-recurring items) of $1.15 per share beat the Zacks Consensus Estimate of $1.12. This currently Zacks #3 Ranked company’s total revenues of $547.9 million lagged the consensus mark of $550.2 million.
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Kirby (KEX) Q2 Earnings In Line, Down Y/Y on Low Revenues
Kirby Corporation’s (KEX - Free Report) second-quarter 2020 earnings of 42 cents per share were in line with the Zacks Consensus Estimate. The bottom line plunged 46.8% year over year.
Total revenues of $541.2 million lagged the Zacks Consensus Estimate of $618.4 million and declined 29.8% year over year. The top line was hurt by a decline in revenues at the marine transportation, and distribution and services segments due to coronavirus-induced weak economic conditions.
Segmental Performance
The company through its subsidiaries operates via the segments marine transportation, and distribution and services.
The marine transportation division is responsible for providing transportation services by tank barge to inland and coastal markets. In the second quarter, revenues at the marine transportation unit decreased 5.8% year over year to $381 million. Segmental operating income also dipped 3.4% year over year to $51.4 million. However, operating margin expanded to 13.5% from 13.2% in the year-ago period.
Inland market revenues decreased 2% year over year due to reduced barge utilization and low fuel rebills. The operating margin for the inland business was in the mid-to high teens.
Revenues at the coastal market fell 17% year over year due to reduced spot market activity, retirement of two large capacity vessels and planned shipyard activity. The coastal market recorded break-even operating margin during the quarter.
The distribution and services segment is responsible for selling replacement parts and focuses on the oil and gas, and commercial and industrial markets. Segmental revenues dropped 56.3% to $160.2 million due to below-par performance in the oil and gas market. Moreover, the segment reported a negative operating margin of 8.8% in the reported quarter against 6.3% in the second quarter of 2019.
The oil and gas market was weak during the second quarter due to reduction in oilfield activity and low oil prices. Operating margin for oil and gas came in negative.
In the commercial and industrial market, revenues slipped year over year due to reduced economic activity and disruptions in the on-highway and power generation businesses. The commercial and industrial operating margin was in low single digits in the quarter under review.
Kirby Corporation Price, Consensus and EPS Surprise
Kirby Corporation price-consensus-eps-surprise-chart | Kirby Corporation Quote
Balance Sheet Highlights
Long-term debt (including current portion) for this Zacks Rank #5 (Strong Sell) company increased to $1.64 billion at the end of the second quarter from $1.59 billion at the end of June 2019. Debt-to-capitalization ratio at the end of second-quarter 2020 was 35% compared with 32.4% a year ago.
Outlook
Kirby believes that it has reached the bottom of coronavirus-led weakness in the activity and utilization levels. Lately, the company has been seeing modest improvement in demand. In inland marine, refinery and petrochemical plant utilization rates have improved. However, given the significant softness in economic activity, the company anticipates average barge utilization to be lower sequentially in the third quarter. This in turn is expected to hurt revenues and operating margins. The company estimates inland revenues and operating income to decline sequentially in the current quarter.
Meanwhile, the coastal market is expected to benefit from reduced shipyard maintenance in the third quarter in a challenging spot market. Despite anticipating reduced activity in the coal transportation business, the company expects sequential improvement in third-quarter coastal revenues and operating income. On the whole, Kirby anticipates the coastal business to be stable for the remainder of this year.
With most customers reducing spending for 2020, the oil and gas market’s activity is expected to remain weak, which in turn is likely to weigh on the distribution and services segment’s performance. The commercial and industrial market continues to be plagued by reduced economic activity. Yet, there has been some improvement in the on-highway and power generation businesses. To mitigate the adversities in the distribution and services segment, the company has controlled costs through workforce reductions, furloughs and a strict check on general and administrative expenses. Benefits of these cost reduction initiatives are expected to be better realized in the third quarter. On the whole, the company expects segment operating margins to improve in the third quarter but will still be below break-even levels.
With stringent control, the company estimates capital expenditures to be approximately $150 million in 2020, indicating a year-over-year reduction of roughly 40%. Free cash flow is predicted in the range of $250-$350 million for the current year.
Sectorial Snapshot
Let’s take a look into some other Zacks Transportation sector companies’ second-quarter earnings results.
Canadian National’s (CNI - Free Report) second-quarter earnings (excluding 36 cents from non-recurring items) of 92 cents per share (C$0.77) were in line with the Zacks Consensus Estimate. However, the bottom line declined 28.7% year over year. Quarterly revenues of $2,315 million (C$3,209 million) missed the Zacks Consensus Estimate of $2,407.6 million and fell 21.8% year over year. This company carries a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
J.B. Hunt Transport (JBHT - Free Report) , presently carrying a Zacks Rank #3 (Hold), reported second-quarter earnings of $1.14 per share that surpassed the Zacks Consensus Estimate by 31 cents. Total revenues of $2,145.6 million also beat the Zacks Consensus Estimate of $2,060.9 million.
Kansas City Southern’s second-quarter earnings (excluding a penny from non-recurring items) of $1.15 per share beat the Zacks Consensus Estimate of $1.12. This currently Zacks #3 Ranked company’s total revenues of $547.9 million lagged the consensus mark of $550.2 million.
Looking for Stocks with Skyrocketing Upside?
Zacks has just released a Special Report on the booming investment opportunities of legal marijuana.
Ignited by new referendums and legislation, this industry is expected to blast from an already robust $6.7 billion to $20.2 billion in 2021. Early investors stand to make a killing, but you have to be ready to act and know just where to look.
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