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Kirby (KEX) Stock Down 2.5% Since Q3 Earnings: Here's Why

Reduced operating efficiencies due to Hurricane Ida hurt Kirby's (KEX) Q3 results.

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This story originally appeared on Zacks

Kirby Corporation KEX reported third-quarter 2021 earnings of 17 cents per share, missing the Zacks Consensus Estimate by 4 cents. Moreover, quarterly earnings plunged 63.04% year over year due to high costs. The lackluster bottom-line performance seems to have displeased investors. Consequently, the stock has lost 2.5% of its value since its earnings release on Oct 28.

- Zacks

Kirby Corporation Price, Consensus and EPS Surprise

Kirby Corporation Price, Consensus and EPS Surprise

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

Total revenues of $598.9 million, however, surpassed the Zacks Consensus Estimate of $559.4 million and rose 20.6% 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  96.2% year over year to $915.8 million.

 

Segmental Performance

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

In the third quarter, revenues in the marine transportation unit increased 6% year over year to $338.5 million despite operations being still disrupted by COVID-19. Segmental operating income declined 47.8% year over year to $16.9 million. Operating margin deteriorated to 5% from 10.1% in the year-ago quarter.

Inland market revenues contributed to 76% of the segmental revenues. Operating margin for the inland business was in the mid-to-high-single digits. The metric was affected by lower-term contract pricing, increased fuel rebills and reduced operating efficiencies due to Hurricane Ida.

Revenues in the coastal market contributed to 24% of the segmental revenues. The coastal market recorded a negative operating margin in the low-single digits. Average barge utilization in the September quarter was in the mid-70% range

In the distribution and services segment, revenues rose 48% to $260.4 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 4.2% in the third quarter of 2021 compared with 0.6% recorded in the third quarter of 2020.

The oil and gas sub-group, which contributed to 41% of the segmental revenues during the September 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 contributed to 59% 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 Sep 30, 2021, Kirby had cash and cash equivalents of $54.3 million compared with $80.3 million at the end of 2020. Long-term debt (including current portion) of this currently Zacks Rank #4 (Sell) stock declined to $1.21billion at the end of the third quarter of 2021 from $1.47 billion at 2020 end. Debt-to-capitalization ratio at the end of the September quarter of 2021 was 0.298 compared with 0.322 at the end of December 2020.

You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.

Outlook

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, increased post-storm production, 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 sequentially improve with operating margins around 10%. In the coastal market, operating margin is expected to be at or slightly below breakeven.

With the distribution and services segment, the oil and gas sub-group is likely to be hit in the fourth quarter as supply-chain woes are likely to delay some sales into the next year, thereby resulting in sequential reductions in revenues and operating income.

Revenues in the commercial and industrial sub-group are likely to decline in the fourth quarter, albeit moderately from the third-quarter 2021 actuals. Operating margin is expected in the low to mid-single digit range.

Kirby estimates capital expenditures in the range of $120-$130 million for 2021. The company’s net cash provided by operating activities is expected between $380 million and $410 million (previous expectation: $395 million and $435 million) for 2021. Free cash flow is estimated in the range of $250-$290 million (previous expectation: $250-$310 million) for the current year.

Sectorial Snapshots

Within the broader Transportation sector, let’s take a look at the third-quarter results of Delta Air Lines DAL, J.B. Hunt Transport Services JBHT and Kansas City Southern KSU.

Delta reported third-quarter earnings (excluding $1.59 from non-recurring items) of 30 cents per share, outpacing the Zacks Consensus Estimate of 15 cents. Revenues of $9,154 million also beat the Zacks Consensus Estimate of $8,370.6 million.

J.B. Hunt reported third-quarter earnings of $1.88 per share, surpassing the Zacks Consensus Estimate of $1.77. Total operating revenues of $3144.8 million outperformed the Zacks Consensus Estimate of $3002.1 million.  

Kansas City Southern reported third-quarter earnings (excluding 31 cents from non-recurring items) of $2.02 per share, missing the Zacks Consensus Estimate of $2.07. Quarterly revenues of $744 million, however, surpassed the Zacks Consensus Estimate of $725.9 million.



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Delta Air Lines, Inc. (DAL): Free Stock Analysis Report

 

J.B. Hunt Transport Services, Inc. (JBHT): Free Stock Analysis Report

 

Kansas City Southern (KSU): Free Stock Analysis Report

 

Kirby Corporation (KEX): Free Stock Analysis Report

 

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