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Kirby Corporation (KEX - Free Report) reported second-quarter 2021 earnings of 17 cents per share, beating the Zacks Consensus Estimate by 5 cents. However, quarterly earnings plunged 59.5% year over year due to high costs. The lacklustre bottom-line performance seems to have displeased investors. Consequently, the stock lost 3.8% of its value since its earnings release on Jul 29, despite outperforming bottom-line projections.
Total revenues of $559.6 million surpassed the Zacks Consensus Estimate of $540.3 million and rose 3.4% year over year. The upside was driven by increase in revenues in the distribution and services, oil and gas and commercial and industrial segments.
Kirby Corporation Price, Consensus and EPS Surprise
The company, through its subsidiaries, operates via the segments marine transportation and distribution and services.
In the second quarter, revenues in the marine transportation unit fell 12.7% year over year to $332.8 million. Segmental operating income also declined 64% year over year to $1.85 million. Operating margin deteriorated to 5.6% from 13.5% in the year-ago quarter.
Inland market revenues declined 16% year over year due to impact of lower pricing and barge utilization. Operating margin for the inland business improved to high-single digits.
Revenues in the coastal were modestly higher from second-quarter 2020 levels, owing to stable pricing on spot and term contracts. The coastal market recorded negative operating margin in the mid-single digits.
In the distribution and services segment, revenues rose 41.5% to $226.70 million due to improved performance in the oil and gas market. Moreover, the segment reported operating margin of 2.7% in the second quarter against negative 8.8% recorded in the second quarter of 2020.
In the oil and gas market, revenues increased from June-end quarter 2020 levels owing to higher oilfield activity stemming from increased demand for new and overhauled engines, transmissions, parts and service. The segment had a negative operating margin in the low-single digits.
In the commercial and industrial market, revenues increased year over year due to improved economic activity across the United States. This sparked higher business levels in the on-highway and power generation businesses. The commercial and industrial segment operating margin was in the mid-single digits.
Balance Sheet Highlights
As of June 30, 2021, Kirby had cash and cash equivalents of $53.1 million compared with $80.3 million at the end of 2020. Long-term debt (including current portion) for this Zacks Rank #3 (Hold) stock declined to $1.27 billion at the end of the second quarter from $1.47 billion at the end of December 2020. Debt-to-capitalization ratio at the end of the second quarter was 29.1% compared with 32.2% at the end of 2020.
Outlook
For the remaining six months of 2021, the company expects growth in both marine transportation and distribution and services as U.S. and international economies reopen. However, recent spike in COVID-19 cases in certain parts of the U.S. and around the world has created uncertainties that could impact the pace of the recovery.
In inland marine, barge utilization is expected to improve to high 80-90% range during the second half of 2021. During the rest of 2021 and into 2022, term contracts that were renewed lower during the last several quarters should gradually reset to reflect the improved market conditions. Thanks to favorable weather conditions and the anticipated increase in barge utilization, Kirby expects inland revenues to increase in the second half of the year and operating margin in the low-double digits for the third quarter. The company expects to witness operating margin improvement in the fourth quarter, subject to seasonal weather disruptions and potential COVID-19 issues slowing the economic recovery.
The coastal market is expected to continue experiencing weak market conditions for the rest of 2021, while increasing demand for refined products is expected to contribute to modest improvement in spot market activity levels. Coastal barge utilization is estimated to increase in the mid-70% range with third and fourth quarter revenues and operating margins modestly improved, compared to the second quarter of 2021.
In the distribution and services segment, the company expects to further improve in the second half of 2021. Third-quarter results are expected to benefit from seasonal summer increases in demand for back-up power generation rental equipment and Thermo King products and service. In the oil and gas market, favorable commodity prices and increasing well completions activity are expected to drive increased demand for new transmissions, service and parts for the duration of the year. In comparison to 2020, full-year segmental revenues are expected to increase by 15-25% with positive operating margins in the low to mid-single digits.
Kirby estimates capital expenditures in the range of $125-$145 million for 2021. The company’s net cash provided by operating activities is expected between $395 million and $435 million (previous expectation: $375 million and $435 million) for 2021. Free cash flow is estimated in the range of $250-$310 million (previous expectation: $230-$310 million) for the current year.
Sectorial Snapshot
Within the broader Transportation sector, Delta Air Lines (DAL - Free Report) , J.B. Hunt Transport Services (JBHT - Free Report) and Kansas City Southern recently reported second-quarter 2021 results.
Delta, carrying a Zacks Rank #3, incurred a loss (excluding $2.09 from non-recurring items) of $1.07 per share. The figure was narrower than the Zacks Consensus Estimate of a loss of $1.41. Revenues of $7,126 million were substantially higher than the year-ago quarter’s levels, buoyed by recent uptick in air-travel demand. The metric topped the Zacks Consensus Estimate of $6,340.9 million.
Kansas City Southern, carrying a Zacks Rank of 4 (Sell), reported second-quarter 2021 earnings (excluding $6.23 from non-recurring items) of $2.06 per share missed the Zacks Consensus Estimate of $2.16. Quarterly revenues of $749.5 million surpassed the Zacks Consensus Estimate of $733.1 million and increased 36.8% year over year, driven by 31% rise in overall carload volumes.
J.B. Hunt, a Zacks #3-Ranked player, reported better-than-expected second-quarter 2021 results. Quarterly earnings of $1.61 per share surpassed the Zacks Consensus Estimate of $1.55. Total operating revenues of $2908.4 million outperformed the Zacks Consensus Estimate of $2722 million and rallied 35.5% year over year.
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Kirby (KEX) Stock Declines 3.8%, Despite Q2 Earnings Beat
Kirby Corporation (KEX - Free Report) reported second-quarter 2021 earnings of 17 cents per share, beating the Zacks Consensus Estimate by 5 cents. However, quarterly earnings plunged 59.5% year over year due to high costs. The lacklustre bottom-line performance seems to have displeased investors. Consequently, the stock lost 3.8% of its value since its earnings release on Jul 29, despite outperforming bottom-line projections.
Total revenues of $559.6 million surpassed the Zacks Consensus Estimate of $540.3 million and rose 3.4% year over year. The upside was driven by increase in revenues in the distribution and services, oil and gas and commercial and industrial segments.
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 second quarter, revenues in the marine transportation unit fell 12.7% year over year to $332.8 million. Segmental operating income also declined 64% year over year to $1.85 million. Operating margin deteriorated to 5.6% from 13.5% in the year-ago quarter.
Inland market revenues declined 16% year over year due to impact of lower pricing and barge utilization. Operating margin for the inland business improved to high-single digits.
Revenues in the coastal were modestly higher from second-quarter 2020 levels, owing to stable pricing on spot and term contracts. The coastal market recorded negative operating margin in the mid-single digits.
In the distribution and services segment, revenues rose 41.5% to $226.70 million due to improved performance in the oil and gas market. Moreover, the segment reported operating margin of 2.7% in the second quarter against negative 8.8% recorded in the second quarter of 2020.
In the oil and gas market, revenues increased from June-end quarter 2020 levels owing to higher oilfield activity stemming from increased demand for new and overhauled engines, transmissions, parts and service. The segment had a negative operating margin in the low-single digits.
In the commercial and industrial market, revenues increased year over year due to improved economic activity across the United States. This sparked higher business levels in the on-highway and power generation businesses. The commercial and industrial segment operating margin was in the mid-single digits.
Balance Sheet Highlights
As of June 30, 2021, Kirby had cash and cash equivalents of $53.1 million compared with $80.3 million at the end of 2020. Long-term debt (including current portion) for this Zacks Rank #3 (Hold) stock declined to $1.27 billion at the end of the second quarter from $1.47 billion at the end of December 2020. Debt-to-capitalization ratio at the end of the second quarter was 29.1% compared with 32.2% at the end of 2020.
Outlook
For the remaining six months of 2021, the company expects growth in both marine transportation and distribution and services as U.S. and international economies reopen. However, recent spike in COVID-19 cases in certain parts of the U.S. and around the world has created uncertainties that could impact the pace of the recovery.
In inland marine, barge utilization is expected to improve to high 80-90% range during the second half of 2021. During the rest of 2021 and into 2022, term contracts that were renewed lower during the last several quarters should gradually reset to reflect the improved market conditions. Thanks to favorable weather conditions and the anticipated increase in barge utilization, Kirby expects inland revenues to increase in the second half of the year and operating margin in the low-double digits for the third quarter. The company expects to witness operating margin improvement in the fourth quarter, subject to seasonal weather disruptions and potential COVID-19 issues slowing the economic recovery.
The coastal market is expected to continue experiencing weak market conditions for the rest of 2021, while increasing demand for refined products is expected to contribute to modest improvement in spot market activity levels. Coastal barge utilization is estimated to increase in the mid-70% range with third and fourth quarter revenues and operating margins modestly improved, compared to the second quarter of 2021.
In the distribution and services segment, the company expects to further improve in the second half of 2021. Third-quarter results are expected to benefit from seasonal summer increases in demand for back-up power generation rental equipment and Thermo King products and service. In the oil and gas market, favorable commodity prices and increasing well completions activity are expected to drive increased demand for new transmissions, service and parts for the duration of the year. In comparison to 2020, full-year segmental revenues are expected to increase by 15-25% with positive operating margins in the low to mid-single digits.
Kirby estimates capital expenditures in the range of $125-$145 million for 2021. The company’s net cash provided by operating activities is expected between $395 million and $435 million (previous expectation: $375 million and $435 million) for 2021. Free cash flow is estimated in the range of $250-$310 million (previous expectation: $230-$310 million) for the current year.
Sectorial Snapshot
Within the broader Transportation sector, Delta Air Lines (DAL - Free Report) , J.B. Hunt Transport Services (JBHT - Free Report) and Kansas City Southern recently reported second-quarter 2021 results.
Delta, carrying a Zacks Rank #3, incurred a loss (excluding $2.09 from non-recurring items) of $1.07 per share. The figure was narrower than the Zacks Consensus Estimate of a loss of $1.41. Revenues of $7,126 million were substantially higher than the year-ago quarter’s levels, buoyed by recent uptick in air-travel demand. The metric topped the Zacks Consensus Estimate of $6,340.9 million.
Kansas City Southern, carrying a Zacks Rank of 4 (Sell), reported second-quarter 2021 earnings (excluding $6.23 from non-recurring items) of $2.06 per share missed the Zacks Consensus Estimate of $2.16. Quarterly revenues of $749.5 million surpassed the Zacks Consensus Estimate of $733.1 million and increased 36.8% year over year, driven by 31% rise in overall carload volumes.
J.B. Hunt, a Zacks #3-Ranked player, reported better-than-expected second-quarter 2021 results. Quarterly earnings of $1.61 per share surpassed the Zacks Consensus Estimate of $1.55. Total operating revenues of $2908.4 million outperformed the Zacks Consensus Estimate of $2722 million and rallied 35.5% year over year.