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Cost-Saving Initiatives Boost Kirby (KEX), Rising Debt Ails

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We have recently updated a report on Kirby Corporation (KEX - Free Report) .

The long-term expected earnings per share (three to five years) growth rate for Kirby is pegged at 12%. The stock has gained 22% in the past year compared with a 69.4% surge of the industry it belongs to.

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Kirby’s cost-management efforts are partly offsetting coronavirus-led adversities. For 2021, the company now anticipates capital expenditures of $120-$130 million (previous outlook: $125-$145 million), indicating a decline of nearly 15% from 2020 levels. With this reduction, Kirby expects to generate a free cash flow of $250-$290 million (previous expectation: $250-$310 million) for the current year.

Within the marine transportation unit, barge markets are expected to improve in the December quarter. Barge volumes are anticipated to benefit from the uptick in economic growth, pent-up demand and new chemical plants. Barge utilization in the fourth quarter is expected in the high 80-90% range. Revenues are likely to improve sequentially with operating margins around 10%.  

Persistent weakness in the coastal market (part of the marine transportation unit) is a concern.  The coastal market recorded a negative operating margin in the low-single digits during the September-end quarter. Kirby expects its coastal market operating margin to be at or slightly below breakeven for the fourth quarter.

KEX’s cash position is dismal. The carrier exited third-quarter 2021 with cash and cash equivalents of $54 million, whereas its long-term debt (including the current portion) was $1,206 million. This implies that the company does not have enough cash to meet its total debt burden.

Zacks Rank & Stocks to Consider

Kirby currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.

Some better-ranked stocks in the broader Zacks Transportation sector are Knight-Swift Transportation Holdings Inc. (KNX - Free Report) , Landstar System, Inc. (LSTR - Free Report) and C.H. Robinson Worldwide, Inc. (CHRW - Free Report) .

The long-term expected earnings per share (three to five years) growth rate for Knight-Swift is pegged at 15%. KNX is benefitting from an improvement in the adjusted operating ratio. Adjusted operating ratio improved to 82.8% in the first nine months of 2021 compared with 86.6% reported in the first nine months of 2020. In third-quarter 2021, the metric improved to 81.3% from 83.9% in the year-ago quarter.  

This uptick in adjusted operating ratio is primarily driven by an increase in revenues in the Trucking, Logistics and Intermodal segments. Notably, the lower the value of the metric, the better. The stock has surged 44.4% in the past year. Knight-Swift sports a Zacks Rank #1.

The long-term expected earnings per share (three to five years) growth rate for Landstar is pegged at 12%. LSTR is benefitting from a gradual recovery in the economy, freight market conditions in the United States.

Landstar’s top and the bottom line increased substantially in each quarter from the third quarter of 2020 owing to robust revenues generated from the primary segment — truck transportation. The stock has rallied 36.1% in the past year. Landstar carries a Zacks Rank #2.

The long-term expected earnings per share (three to five years) growth rate for C.H. Robinson is pegged at 9%. CHRW benefits from higher pricing and volumes across most of its service lines. Total revenues surged 42.4% year over year in the first nine months of 2021, with higher revenues across all segments.

CHRW’s measures to reward its shareholders are encouraging. Driven by the tailwinds, CHRW’s shares moved up 1.7% in the past month. C.H. Robinson sports a Zacks Rank #1.