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Kirby (KEX) Misses on Q2 Earnings, Cuts 2019 Earnings View

Zacks Equity Research

Kirby Corporation’s KEX second-quarter 2019 earnings of 79 cents per share lagged the Zacks Consensus Estimate of 81 cents. Weakness in the distribution and services unit as well as subpar inland operating conditions affected results. However, the bottom-line improved year over year on higher revenues.

Although total revenues of $771 million outpaced the Zacks Consensus Estimate of $768.7 million, the same dipped 3.9% year over year. The top line was driven by increased sales at the marine transportation division.

Segmental Performance

Revenues at the marine transportation unit increased 6.9% to $404.29 million. Also, segmental operating income surged 39.3% to $53.24 million. Further, segmental operating margin expanded to 13.2% from 10.1% a year ago.

Inland market revenues rose approximately 8% year over year owing to contributions from last year’s acquisitions, favorable pricing and higher barge utilization. The operating margin for the inland business was in the mid-teens.

Revenues at the coastal market inched up 3% on a year-on-year basis as a result of strong pricing and higher barge utilization. Operating margin for the coastal market was in the low to mid-single digits.

Distribution and services revenues decreased 13.6% to $366.76 million due to below-par performance in the oil and gas market. Also, operating income at the segment plunged 42.5% to $23.13 million in the reported quarter. Further, operating margin deteriorated to 6.3% from 9.5% in the year-ago period.

Revenues and operating income in the commercial and industrial market augmented on a year-over-year basis, driven by higher installations of back-up power systems. Operating margin for the commercial and industrial market was in the mid-single digits during the 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


Balance Sheet Highlights

Long-term debt at Kirby (including the current portion) increased to $1.59 billion at the end of the second quarter from $1.44 billion at the end of the year-ago period. Debt-to-capitalization ratio at the end of the second quarter was 32.4% compared with 31.2% in the prior year.

Outlook

This Zacks Rank #3 (Hold) company has lowered its earnings guidance for the full year to $2.80-$3.20 per share from $3.25-$3.75 anticipated previously. The mid-point ($3) of the guided range falls short of the Zacks Consensus Estimate of $3.39. The downside is due to softness in distribution and services unit and to a lesser extent, from subdued operating conditions in inland marine. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.

During the third quarter, inland revenues are expected to increase slightly sequentially. While better weather conditions should lead to higher efficiencies, persistent high water conditions in the Mississippi River among other factors might partly affect results.

Meanwhile, third-quarter coastal revenues and operating income are estimated to be commensurate with the second-quarter figures. However, revenues and operating margin might take a hit in the fourth quarter due to seasonal sluggishness.

Within the distribution and services segment, commercial and industrial market revenues and operating income are forecast to fall in the third quarter due to fewer installations of major back-up power systems and other factors.

Meanwhile, the outlook for capital expenditures in 2019 is unchanged between $225 million and $245 million.

Upcoming Releases

Investors interested in the broader Transportation sector are keenly awaiting second-quarter earnings reports from key players, namely Expeditors International of Washington, Inc. EXPD, Air Lease Corporation AL and Hertz Global Holdings, Inc HTZ. While Expeditors and Hertz will report financial numbers on Aug 6, Air Lease will announce the same on Aug 8.

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