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Why Is Kirby (KEX) Up 1.3% Since Last Earnings Report?
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It has been about a month since the last earnings report for Kirby (KEX - Free Report) . Shares have added about 1.3% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Kirby due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Earnings Beat at Kirby in Q4
Quarterly earnings of 67 cents per share outpaced the Zacks Consensus Estimate of 64 cents and improved more than 100% year over year. Total revenues of $730.2 million beat the Zacks Consensus Estimate of $722.1 million and improved 23.5% year over year on the back of higher revenues in the marine transportation and distribution and services segments.
For fourth-quarter 2022, adjusted EBITDA came in at $113.5 million compared with $83.5 million in the year-ago reported quarter. Total costs and expenses (on a reported basis) grew 20.1% year over year to $672.42 million.
Segmental Performance
The company operates via two segments, namely, marine transportation and distribution and services.
In the fourth quarter, revenues in the marine transportation unit increased 20.6% year over year to $422.73 million. Segmental operating income jumped to $46.7 million in the reported quarter compared with $25.7 million in the year-ago period. The operating margin improved to 11.1% compared with 7.3% in the year-ago period.
Inland market revenues accounted for 80% of the segmental revenues. Revenues in the inland market increased 24% year over year, owing to higher barge utilization, pricing and fuel rebill. Operating margins improved sequentially and year over year to the low teens.
Revenues in the coastal market grew 8% year over year and accounted for 20% of the segmental revenues. The coastal market recorded a positive operating margin in the low-single digits during the quarter. Average barge utilization in the fourth quarter was in the low to mid-90% range.
In the distribution and services segment, revenues rose 27.7% to $307.42 million. Segmental operating income jumped to $17.1 million in the reported quarter compared with $7.5 million in the year-ago period. Moreover, the segment reported an operating margin of 5.5% in the fourth quarter of 2022 compared with 3.1% in fourth-quarter 2021.
The commercial and industrial sub-group, which accounted for 58% of the segmental revenues, benefited from strong economic activity across the United States, which resulted in higher business levels in marine repair, power generation and on-highway. The operating margin at the commercial and industrial sub-group was in the high-single digits.
The oil and gas sub-group, which accounted for 42% of the segmental revenues during the reported quarter, benefited from higher oilfield activity, resulting in increased demand for products in the manufacturing business, new transmissions and parts in the distribution business. However, these were partially offset by supply chain delays. The segment had an operating margin in the low-single digits.
Balance Sheet Highlights & Cash Flow
As of Dec 31, 2022, Kirby had cash and cash equivalents of $80.6 million compared with $37 million at the end of September 2022. Total debt was $1,079.6 million at the end of the fourth quarter compared with $1,118.5 million at the end of September 2022.
During the reported quarter, KEX generated $132.9 million of net cash from operating activities, and capital expenditures came in at $52.3 million. Free cash flowwas $80.6 million.
2023 Outlook
Kirby anticipates net cash generated from operating activities between $480 million and $580 million for 2023.
For inland marine, Kirby expects favorable market conditions with continued growth in customer demand, steady volumes from refinery and petrochemical plants and modest net new barge construction in the industry in 2023. These factors should result in barge utilization rates in the low to mid-90% range throughout the year. Overall, inland revenues are anticipated to increase by low-double digits on a full-year basis.
For coastal marine, Kirby anticipates modestly improved customer demand during the remaining part of the year, with barge utilization in the low to mid-90% range. Revenues and operating margins are anticipated to be impacted by an approximate doubling of planned shipyard maintenance days with ballast water treatment installations on certain vessels.
For 2023, coastal revenues are anticipated to be flat on a year-over-year basis. Coastal operating margins are anticipated to near break-even to low-single digits on a full-year basis.
In distribution and services, favorable oilfield fundamentals and steady demand in commercial and industrial are anticipated to continue in 2023. In the oil and gas market, high commodity prices, increasing rig counts and growing well completions activity are expected to yield strong demand for OEM products, parts and services in the distribution business.
In manufacturing, Kirby anticipates demand for environmentally friendly pressure pumping and e-frac power generation equipment to remain strong, with new orders and increased deliveries of new equipment during the year.
On the flip side, ongoing supply chain issues and long lead times are anticipated to persist in the near term, contributing to some volatility as deliveries of new products shift between quarters and into 2024. In commercial and industrial, robust markets are anticipated to boost revenue growth in the low double-digit percentage range, with increased activity in power generation, marine repair and on-highway. Overall, Kirby anticipates segment revenues to grow 10% to 20% on a full-year basis, with operating margins in the mid to high-single digits.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates.
The consensus estimate has shifted -5.6% due to these changes.
VGM Scores
Currently, Kirby has a nice Growth Score of B, though it is lagging a bit on the Momentum Score front with a C. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Kirby has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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Why Is Kirby (KEX) Up 1.3% Since Last Earnings Report?
It has been about a month since the last earnings report for Kirby (KEX - Free Report) . Shares have added about 1.3% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Kirby due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Earnings Beat at Kirby in Q4
Quarterly earnings of 67 cents per share outpaced the Zacks Consensus Estimate of 64 cents and improved more than 100% year over year. Total revenues of $730.2 million beat the Zacks Consensus Estimate of $722.1 million and improved 23.5% year over year on the back of higher revenues in the marine transportation and distribution and services segments.
For fourth-quarter 2022, adjusted EBITDA came in at $113.5 million compared with $83.5 million in the year-ago reported quarter. Total costs and expenses (on a reported basis) grew 20.1% year over year to $672.42 million.
Segmental Performance
The company operates via two segments, namely, marine transportation and distribution and services.
In the fourth quarter, revenues in the marine transportation unit increased 20.6% year over year to $422.73 million. Segmental operating income jumped to $46.7 million in the reported quarter compared with $25.7 million in the year-ago period. The operating margin improved to 11.1% compared with 7.3% in the year-ago period.
Inland market revenues accounted for 80% of the segmental revenues. Revenues in the inland market increased 24% year over year, owing to higher barge utilization, pricing and fuel rebill. Operating margins improved sequentially and year over year to the low teens.
Revenues in the coastal market grew 8% year over year and accounted for 20% of the segmental revenues. The coastal market recorded a positive operating margin in the low-single digits during the quarter. Average barge utilization in the fourth quarter was in the low to mid-90% range.
In the distribution and services segment, revenues rose 27.7% to $307.42 million. Segmental operating income jumped to $17.1 million in the reported quarter compared with $7.5 million in the year-ago period. Moreover, the segment reported an operating margin of 5.5% in the fourth quarter of 2022 compared with 3.1% in fourth-quarter 2021.
The commercial and industrial sub-group, which accounted for 58% of the segmental revenues, benefited from strong economic activity across the United States, which resulted in higher business levels in marine repair, power generation and on-highway. The operating margin at the commercial and industrial sub-group was in the high-single digits.
The oil and gas sub-group, which accounted for 42% of the segmental revenues during the reported quarter, benefited from higher oilfield activity, resulting in increased demand for products in the manufacturing business, new transmissions and parts in the distribution business. However, these were partially offset by supply chain delays. The segment had an operating margin in the low-single digits.
Balance Sheet Highlights & Cash Flow
As of Dec 31, 2022, Kirby had cash and cash equivalents of $80.6 million compared with $37 million at the end of September 2022. Total debt was $1,079.6 million at the end of the fourth quarter compared with $1,118.5 million at the end of September 2022.
During the reported quarter, KEX generated $132.9 million of net cash from operating activities, and capital expenditures came in at $52.3 million. Free cash flowwas $80.6 million.
2023 Outlook
Kirby anticipates net cash generated from operating activities between $480 million and $580 million for 2023.
For inland marine, Kirby expects favorable market conditions with continued growth in customer demand, steady volumes from refinery and petrochemical plants and modest net new barge construction in the industry in 2023. These factors should result in barge utilization rates in the low to mid-90% range throughout the year. Overall, inland revenues are anticipated to increase by low-double digits on a full-year basis.
For coastal marine, Kirby anticipates modestly improved customer demand during the remaining part of the year, with barge utilization in the low to mid-90% range. Revenues and operating margins are anticipated to be impacted by an approximate doubling of planned shipyard maintenance days with ballast water treatment installations on certain vessels.
For 2023, coastal revenues are anticipated to be flat on a year-over-year basis. Coastal operating margins are anticipated to near break-even to low-single digits on a full-year basis.
In distribution and services, favorable oilfield fundamentals and steady demand in commercial and industrial are anticipated to continue in 2023. In the oil and gas market, high commodity prices, increasing rig counts and growing well completions activity are expected to yield strong demand for OEM products, parts and services in the distribution business.
In manufacturing, Kirby anticipates demand for environmentally friendly pressure pumping and e-frac power generation equipment to remain strong, with new orders and increased deliveries of new equipment during the year.
On the flip side, ongoing supply chain issues and long lead times are anticipated to persist in the near term, contributing to some volatility as deliveries of new products shift between quarters and into 2024. In commercial and industrial, robust markets are anticipated to boost revenue growth in the low double-digit percentage range, with increased activity in power generation, marine repair and on-highway. Overall, Kirby anticipates segment revenues to grow 10% to 20% on a full-year basis, with operating margins in the mid to high-single digits.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates.
The consensus estimate has shifted -5.6% due to these changes.
VGM Scores
Currently, Kirby has a nice Growth Score of B, though it is lagging a bit on the Momentum Score front with a C. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Kirby has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.