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Kirby (KEX) Incurs Loss in Q1, Revenues Surpass Estimates

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Kirby Corporation (KEX - Free Report) incurred a loss of 6 cents per share in the first quarter of 2021, comparing unfavorably with the Zacks Consensus Estimate of earnings of 11 cents. In the year-ago period, the company reported earnings of 59 cents. Results were hurt by coronavirus-led woes, low pricing in marine transportation and adversities from the winter storm Uri.

Total revenues of $496.9 million surpassed the Zacks Consensus Estimate of $473.4 million, but declined 22.8% 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

The company, through its subsidiaries, operates via the segments marine transportation, and distribution and services.

In the first quarter, revenues in the marine transportation unit fell 25.4% year over year to $300.95 million. Segmental operating income also declined 96.2% year over year to $1.9 million. Operating margin deteriorated to 0.6% compared with 12.6% in the year-ago period.

Inland market revenues dropped 30% year over year due to reduced barge utilization and lower pricing. Operating margin for the inland business was in the low to mid-single digits.

Revenues at the coastal market fell 10% year over year due to reduced barge utilization, lower fuel rebills, and retirements of three large-capacity vessels. The coastal market recorded negative operating margin in the mid-single digits.

At the distribution and services segment, revenues slumped 18.6% to $195.90 million due to below-par performance in the oil and gas market. Moreover, the segment reported operating margin of 1.5% in the first quarter, flat year over year.

The oil and gas market was weak during the first quarter due to reduction in oilfield activity. It was also affected by the winter storm Uri. The oil and gas market had a negative operating margin in the mid-single digits.

In the commercial and industrial market, revenues decreased year over year due to lower activity levels in the on-highway and power generation businesses caused by the coronavirus-led reduced economic activity. The winter storm Uri also affected activity levels at the commercial and industrial markets. The commercial and industrial operating margin was in the mid-single digits.

Balance Sheet Highlights

As of March 31, 2021, Kirby had cash and cash equivalents of $52.3 million compared with $80.3 million at the end of 2020. Long-term debt (including current portion) for this Zacks Rank #4 (Sell) stock decreased to $1.35 billion at the end of the first quarter from $1.47 billion at the end of December 2020. Debt-to-capitalization ratio at the end of the first quarter of 2021 was 30.4% compared with 32.2% at the end of 2020.

Outlook

As the economy continues to recover, Kirby anticipates “meaningful improvement in pricing and utilization levels in the second half of the year”. The company expects market conditions and barge utilization in inland marine to improve in the second quarter, which in turn should boost spot market pricing in the coming months.

Additionally, at the distribution and services segment, Kirby expects activity levels to increase, leading to higher revenues and improved operating margins. The company expects to “return to profitability” in the second quarter.

In inland marine, barge utilization is expected to improve to more than 80% as the economy recovers and refineries and chemical plants resume full operations. The company estimates its barge utilization to improve into the high-80%-to-low-90% range in the second half of 2021. Thanks to favorable weather conditions and the anticipated increase in barge utilization, Kirby expects inland revenues and operating margin to improve sequentially in the second quarter. Due to the ramp-up in operations, costs, such as maintenance, horsepower, and labor are expected to increase in the second quarter, the company stated.

Meanwhile, the coastal market is expected to continue to experience weak market conditions and reduced spot demand in the second quarter. Coastal barge utilization is estimated to be in the mid-70% range in the second quarter. Revenues and operating margin are expected to be similar to the first quarter of 2021.

In the distribution and services segment, the company anticipates sequential improvement in revenues and operating income in the second quarter, owing to expectations of increased activity levels in the oilfield as the economy continues to recover. Commercial and industrial revenues are expected to benefit from the improving economy and growth in the on-highway market. Moreover, higher commodity prices and increasing well completions activity in the oil and gas market are likely to lead to improved demand for new transmissions, service and parts.

Kirby estimates capital expenditures to be in the range of $125-$145 million in 2021. The company’s net cash provided by operating activities is expected to be between $375 million and $435 million in 2021. Free cash flow is estimated in the range of $230 million-$310 million in the current year.

Sectorial Snapshot

Let’s take a look at some of the other recently released earnings reports from companies within the Zacks Transportation sector.

Canadian National Railway Company (CNI - Free Report) , carrying a Zacks Rank #3 (Hold), reported first-quarter 2021 earnings (excluding 11 cents from non-recurring items) of 97 cents per share (C$1.23), missing the Zacks Consensus Estimate of 99 cents. Quarterly revenues of $2,791.6 million (C$3,535 million) lagged the Zacks Consensus Estimate of $2,813.1 million.

Landstar System (LSTR - Free Report) , sporting a Zacks Rank #1 (Strong Buy), reported first-quarter 2021 earnings of $2.01 per share, surpassing the Zacks Consensus estimate of $1.61. Additionally, revenues of $1,287.5 million outperformed the Zacks Consensus Estimate of $1,142.5 million. You can see the complete list of today's Zacks #1 Rank stocks here.

Southwest Airlines (LUV - Free Report) , carrying a Zacks Rank of 3, incurred a loss of $1.72 per share (excluding $1.91 from non-recurring items) in the first quarter of 2021, narrower than the Zacks Consensus Estimate of a loss of $1.82. Meanwhile, operating revenues of $2,052 million surpassed the Zacks Consensus Estimate of $2,031.7 million.

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