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Kirby (KEX) Rides on Segmental Growth Amid Rising Costs

Kirby Corporation (KEX) is benefiting from increased demand at the distribution and services segment and favorable market conditions at the marine transportation unit. Notably, shares of Kirby have gained 14.7% so far this year against the 3.6% decline of the industry it belongs to.

Zacks Investment Research
Zacks Investment Research

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The company recently reported first-quarter 2023 earnings of 68 cents per share, which outpaced the Zacks Consensus Estimate of 65 cents and improved more than 100% year over year. Total revenues of $750.4 million beat the Zacks Consensus Estimate of $704.7 million and improved 22.9% year over year on the back of higher revenues in the marine transportation and distribution and services segments.

How is Kirby Placed?

Strength across the segments are boosting Kirby’s top line. The distribution and services segment is benefiting from increased demand for products and services. In first-quarter 2023, revenues from the segment rose 32.4% to $337.94 million. Segmental operating income rose to $22.8 million in the reported quarter compared with $11 million in the year-ago period. Moreover, the segment reported an operating margin of 6.7% in the first quarter of 2023 compared with 4.3% in first-quarter 2022. The operating margin at the commercial and industrial sub-group (56% of the segmental revenues) was in the high-single digits. The oil and gas sub-group (44% of the segmental revenues) reported an operating margin in the mid-single digits.

Revenues in the marine transportation unit increased 16% year over year in first-quarter 2023. Segmental operating income jumped to $43 million in the reported quarter compared with $16.9 million in the year-ago period. The operating margin improved to 10.4% compared with 4.8% in the year-ago period. Revenues in inland (82% of the segmental revenues) increased 22% year over year owing to increased volumes, barge utilization, pricing and fuel rebills. Average barge utilization in the coastal market (18% of marine transportation segmental revenues) in the first quarter was in the mid to high-90% range.

Despite such positives, revenues in the coastal market (18% of marine transportation segment) decreased modestly year over year in first-quarter 2023 due to downtime associated with planned shipyard maintenance days. Coastal operating margin was negative in the low to mid-single digits and was impacted by lost revenues and costs incurred as a result of planned shipyards.

Inland’s (82% of the segmental revenues) operating margin was in the low teens for the quarter and was affected by challenges associated with the poor navigational conditions during the quarter.

Also, Kirby’s liquidity position is a concern. Cash and cash equivalents of $26.69 million at the end of the first quarter of 2023 was lower than $1,079.64 million of long-term debt (inclusive of the current portion). This implies that the company does not have enough cash to meet its debt burden.

Zacks Rank and Stocks to Consider

Currently, Kirby carries a Zacks Rank #3 (Hold).

Some better-ranked stocks for investors interested in the Zacks Transportation sector are Copa Holdings, S.A. CPA and Allegiant Travel Company ALGT.

Copa Holdings, which presently sports a Zacks Rank #1 (Strong Buy), is aided by improved air-travel demand. We are encouraged by the company’s initiatives to modernize its fleet. CPA's focus on its cargo segment is also impressive.  You can see the complete list of today’s Zacks #1 Rank stocks here.

For second-quarter and full-year 2023, CPA’s earnings are expected to register 765.6% and 75.4% growth, respectively, on a year-over-year basis.

Allegiant, currently carries a Zacks Rank #2 (Buy), also benefits from buoyant air-travel demand. With air-travel demand rising in the United States, operating revenues improved 8.5% year over year in 2022.

Management expects revenues to remain strong in 2023 as well. In first-quarter 2023, operating revenues increased 29.9% on a year-over-year basis. For second-quarter and full-year 2023, ALGT’s earnings are estimated to rise 364.5% and 192%, respectively, on a year-over-year basis.

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