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Kirby (KEX) Stock Up More Than 5% Since Q4 Earnings Release

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Kirby Corporation (KEX - Free Report) reported fourth-quarter 2021 earnings (excluding 9 cents from non-recurring items) of 27 cents per share, which surpassed the Zacks Consensus Estimate of 25 cents. This earnings beat, despite coronavirus-induced crewing challenges and supply chain woes, seems to have pleased investors, driving the stock up by 5.2% since its earnings release on Jan 27.

The bottom line, however, plunged 27% year over year due to high costs. Total revenues of $591.3 million fell short of the Zacks Consensus Estimate of $595.5 million, but jumped 20.7% year over year. The upside was driven by higher revenues at the marine transportation, and distribution and services segments. Total costs (on a reported basis) escalated 20.4% year over year to $559.67 million.

Segmental Performance

The company operates via the segments of marine transportation, and distribution and services.

In the fourth quarter, revenues in the marine transportation unit increased 17.1% year over year to $350.57 million despite operations being disrupted by COVID-19. Segmental operating income declined 11.9% year over year to $25.68 million. Operating margin deteriorated to 7.3% from 9.7% in the year-ago quarter.

Kirby Corporation Price, Consensus and EPS Surprise

Kirby Corporation Price, Consensus and EPS Surprise

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


Inland market revenues accounted for 77% of the segmental revenues. Operating margin for the inland business improved sequentially to nearly 10% despite increased costs associated with COVID-19.

Revenues in the coastal market accounted for 23% of the segmental revenues. The coastal market recorded a near break-even operating margin in the fourth quarter. Average barge utilization in the December quarter was in the 90% range.

In the distribution and services segment, revenues rose 26.5% to $240.70 million owing to improved performance in the oil and gas, as well as commercial and industrial markets. Moreover, the segment reported an operating margin of 3.1% in the fourth quarter of 2021 compared with -1.5% recorded in the fourth quarter of 2020.

The oil and gas sub-group, which accounted for 37% of the segmental revenues during the December quarter, benefited from increased manufacturing deliveries of pressure pumping and frac-based power generation equipment, as well as upbeat demand for new transmissions, parts and service in distribution. The segment had operating margin in the low-single digits.

The commercial and industrial sub-group, which accounted for 63% of the segmental revenues, gained from the betterment in demand for equipment, parts and service in on-highway and power generation businesses. Uptick in product sales and seasonal service activity in Thermo-King business also aided results. Operating margin at the commercial and industrial sub-group was in the mid-single digits.

Balance Sheet Highlights

As of Dec 31, 2021, Kirby had cash and cash equivalents of $34.81 million compared with $80.34 million at the end of 2020. Long-term debt (including current portion) of this Zacks Rank #5 (Strong Sell) company declined to $1.16 billion at the end of the fourth quarter of 2021 from $1.47 billion at 2020 end. Debt-to-capitalization ratio at the end of the December quarter of 2021 was 0.29 compared with 0.32 at the end of December 2020.

2022 Outlook

In inland marine, within the marine transportation unit, Kirby expects favorable market conditions to continue in 2022, contributing to increased volumes from new petrochemical plants. With improvement in the spot market, barge utilization is expected in the range of high 80% to low 90%. The company anticipates inland marine revenues to climb 10-15% year over year in 2022 with improvement in business and renewed contracts. Operating margin is estimated in the range of low double digits to mid-teens for the year. However, during the first quarter of 2022, inland revenues are expected to be hurt by severe winter weather, Omicron-induced crew challenges and increased costs.

In coastal marine, Kirby expects customer demand to improve in the current year owing to recovery in refined products and black oil transportation volumes from the pandemic-led weakness. However, the company expects pricing to remain weak due to underutilized barge capacity across the industry. With modest improvement in the spot market and Kirby’s retirement of underutilized tank barges during the third quarter of 2021, coastal barge utilization is expected in the 90% range for 2022. Despite improvement in spot-market utilization, KEX predicts coastal revenues to decline in mid-single digits year over year in 2022 due to expected reductions in coal shipments and impact from the company’s Hawaii-market exit. Omicron-induced crewing issues are also expected to dent coastal revenues. Coastal operating margins are forecast to be within a small loss in the low single digits to near break even.

In the distribution and services segment, Kirby expects revenues to increase 30-40% year over year due to the anticipation of improved activity levels owing to strength in the oilfield market. However, supply chain disruptions are expected to slow down new equipment deliveries in 2022. In commercial and industrial, increased activity in power generation, marine repair and on-highway are expected to generate revenue growth in double-digit percentage in the current year.

Kirby expects capital expenditures between $170 and $190 million for 2022. Free cash flow is estimated in the range of $210 million-$310 million for 2022.

Sectorial Snapshots

Within the broader Transportation sector, CSX Corporation (CSX - Free Report) , Canadian National Railway (CNI - Free Report) and GATX Corporation (GATX - Free Report) recently reported fourth-quarter 2021 results.

CSX, carrying a Zacks Rank #3 (Hold), reported fourth-quarter 2021 earnings of 42 cents per share, which surpassed the Zacks Consensus Estimate by a penny. The bottom line improved in double digits year over year owing to higher revenues.

CSX’s total revenues of $3,427 million outperformed the Zacks Consensus Estimate of $3296 million. The top line augmented 21.3% year over year owing to growth across all its businesses, as well as revenues from Quality Carriers, which the company acquired in July 2021.

Canadian National, carrying a Zacks Rank #3, reported fourth-quarter 2021 earnings (excluding 2 cents from non-recurring items) of $1.36 per share (C$1.71), which surpassed the Zacks Consensus Estimate of $1.21. The bottom line increased in double digits year over year due to lower costs.

Canadian National’s quarterly revenues of $2,977.4 million (C$3,753 million) topped the Zacks Consensus Estimate of $2,917.4 million. The top line improved year over year, driven by higher freight rates and fuel surcharges.

GATX, carrying a Zacks Rank #2 (Buy), reported fourth-quarter 2021 earnings (excluding 11 cents from non-recurring items) of $1.58 per share, which surpassed the Zacks Consensus Estimate of $1.07. The bottom line surged more than 200% year over year. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

GATX’s total revenues of $321 million increased 5.3% year over year, mainly due to a 5.2% rise in lease revenues, which came in at $288.4 million. Lease revenues contributed 89.8% to the top line.