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Kirby (KEX) Earnings Surpass Estimates in Q3, Decline Y/Y

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Kirby Corporation’s (KEX - Free Report) reported mixed third-quarter 2020 results, with earnings beating the Zacks Consensus Estimate and revenue missing the same.

Kirby’s earnings of 46 cents per share beat the Zacks Consensus Estimate by 9 cents. However, the bottom line plunged 42.5% year over year.

Total revenues of $496.6 million lagged the Zacks Consensus Estimate of $526.5 million and declined 25.5% year over year. The top line was hurt by a decline in revenues at the marine transportation, and distribution and services segments stemming from the coronavirus-induced weak economic conditions.

Kirby Corporation Price, Consensus and EPS Surprise

Kirby Corporation Price, Consensus and EPS Surprise

Kirby Corporation price-consensus-eps-surprise-chart | Kirby Corporation Quote

Segmental Performance

Marine Transportation Segment

In the third quarter, revenues in the marine transportation unit fell 22.3% year over year to $320.6 million. Segmental operating income also dipped 55.4% year over year to $32.4 million. However, operating margin deteriorated to 10.1% from 17.6% in the year-ago quarter.

Inland market revenues declined 22% year over year due to reduced barge utilization and low fuel rebills. The operating margin for the inland business was in the mid-teens.

Revenues at the coastal market fell 25% year over year due to reduced spot market activity, retirement of three large capacity vessels, lower fuel rebills and delays associated with hurricanes and tropical storms along the East and Gulf Coasts. The coastal market recorded negative operating margin in the mid-single digits during the quarter.

Distribution and Services Segment

Segmental revenues dropped 30.7% to $176 million due to below-par performance in the oil and gas market. Moreover, the segment reported 0.6% operating margin in the reported quarter against 3.6% in the prior-year quarter.

The oil and gas market was weak during the third quarter due to reduction in oilfield activity and low oil prices. Oil and gas market had a negative operating margin in the low double digits.

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 mid-single digits for the quarter under review.

Balance Sheet Highlights

As of Sep 30, the company had $119.6 million of cash and cash equivalents compared to $24.7 million at the end of 2019. Long-term debt (including current portion) for this Zacks Rank #3 (Hold) company increased to $1.6 billion at the end of the third quarter from $1.4 billion at the end of Dec 2019. Debt-to-capitalization ratio at the end of third-quarter 2020 was 33.9% compared with 28.9% at the end of 2019. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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. For the December end quarter Kirby expects its results to be impacted by continued low barge utilization, pricing pressure, normal seasonality from weather in marine, and customer budget exhaustion in distribution and services.

In inland marine, Kirby expects improvement in barge utilization as refinery and chemical plants recover from recent hurricanes and economic activity gradually increases. The reopening of the Illinois River in October is also expected to contribute some sequential improvement in barge utilization. However, market conditions are still expected to stay under pressure due to the pandemic. Kirby expects its inland revenues and operating margins will be flat to down slightly in the fourth quarter on a sequential basis.

In coastal, the spot market is expected to remain challenging in the near term until demand for refined products and black oil materially improves. Kirby expects coastal December end quarter revenues to be flat sequentially with operating margins in the negative low single digits.

In distribution and services segment, weak oil and gas market, potential customer budget exhaustion and some seasonality is likely to result in sequential reductions in revenue and operating income. Compared with the September quarter, segment revenues are expected to modestly decline in the fourth quarter with operating margins in the negative low to mid-single digits.

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 $300-$350 million for the current year.

Sectorial Snapshot

Apart from Kirby, let’s take a look at some other Zacks Transportation sector’s third-quarter earnings like Delta Air Lines (DAL - Free Report) , J.B. Hunt Transport Services (JBHT - Free Report) and United Airlines Holdings, Inc. (UAL - Free Report) .

Delta incurred a loss (excluding $5.17 from non-recurring items) of $3.30 per share in the September quarter, wider than the Zacks Consensus Estimate of a loss of $3.14. With the health peril showing no signs of subsiding, passenger revenues continued to be weak in the September quarter as well, with a plunge of 83% year over year to $1,938 million.

J.B. Hunt reported mixed third-quarter 2020 results, with earnings missing estimates and revenues beating the same. Quarterly earnings of $1.18 per share fell short of the Zacks Consensus Estimate of $1.26. Moreover, the bottom line declined 15.7% year over year due to disappointing performance in its intermodal (JBI) unit. Total operating revenues increased 4.6% to $2,472.5 million. Revenues also beat the consensus mark of $2,345.2 million.

United Airlines incurred a loss (excluding $1.83 from non-recurring items) of $8.16 per share, wider than the Zacks Consensus Estimate of a loss of $7.63. Results were hurt by coronavirus-induced weakness in air-travel demand. Moreover, operating revenues of $2,489 million slumped 78.1% year over year and lagged the Zacks Consensus Estimate of $2,570.1 million. The year-over-year plunge was caused by 84.3% drop in passenger revenues to $1,649 million.

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