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Marine Unit Buoys Kirby Amid Oil and Gas Market Weakness

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We recently issued an updated report on Kirby Corporation (KEX - Free Report) . Disappointing performance of the oil and gas market amid COVID-19 outbreak hurts Kirby’s financials. Meanwhile, growth in marine transportation division bodes well.

Significant growth in the company’s marine transportation division is commendable. Segmental revenues increased 7% in 2019 and 9.6% in the first quarter. The Cenac acquisition and favorable pricing in the inland market are driving performance in this segment. The unit is also benefiting from higher barge utilization rates and improved pricing at the coastal market. Moreover, the company’s inland revenues are expected to increase in low double digits to mid-teens’ percentage range while the inland operating margin is predicted in the high teens. The upside can be primarily attributed to consistent rise in customer demand, higher volumes from new petrochemical plants and net new barge construction in the industry.


Due to disappointing performance in the oil and gas market, distribution and services revenues fell approximately 16% year over year in 2019 and 36.1% in the first quarter. The oil and gas market was weak during the first quarter due to reduction in oilfield activity. The already weak market conditions were worsened by the COVID-19 pandemic, which reduced business activity in the distribution and services segment.

Additionally, reduced activity in coal transportation business is likely to affect coastal revenues (part of the broader marine transportation segment’s revenues) in 2020. Moreover, the coronavirus outbreak is ailing the company’s petrochemical tank-barge demand due to an economic slowdown. Thanks to the uncertainty stemming from the pandemic, Kirby has withdrawn its 2020 earnings guidance.

Zacks Rank & Stocks to Consider

Kirby currently carries a Zacks Rank #4 (Sell).

Some better-ranked stocks in the space are Allegiant Travel Company (ALGT - Free Report) , Alaska Air Group, Inc. (ALK - Free Report) and FedEx Corporation (FDX - Free Report) .  All the stocks carry a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank stocks here.

Long-term (three to five years) expected earnings per share growth rate for Allegiant, Alaska Air and FedEx is at 20.85%, 14.57% and 12%, respectively.

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