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Morningstar | Abundant tank-barge supply a headwind for Kirby, but conditions should improve in back half of 2018.

Kirby is the dominant player in the U.S. inland and coastal marine tank barging industry. Despite pricing headwinds from an abundance of market capacity in the coastal segment, its scale yields efficiency advantages that should allow its core marine barging unit to post economic profit (on average) over the long run. The inland tank barging industry enjoys favorable characteristics. For one, it's regulated by the Jones Act, which prevents non-U.S.-based firms from operating between domestic ports. Although alternative modes of transport like railroads can move cargo faster, barging is often a more efficient means of moving certain bulk commodities--a 15-barge line-haul tow equates to 260 railroad tank cars or 825 tractor-trailer tank trucks. Kirby has been active on the acquisition front. The 2011 United deal expanded its diesel engine operations into the land-based oilfield equipment services market (engines, transmissions, and pressure pumps), namely North American shale gas drilling. Also in 2011, Kirby picked up coastal tank barge operator K-Sea, which extended the company into the coastwise barging market (including the East, West, and Gulf coasts). In 2017, it bought Stewart & Stevenson, which boosts the scope of Kirby's diesel engine services and oilfield equipment distribution operations. Kirby also continues to boost its presence in U.S. inland tank barging markets by acquiring fleets from smaller competitors, such as the early 2018 Higman Marine deal. Kirby's coastal barging unit is grappling with pricing pressure linked to an influx of repurposed barges previously used for moving crude oil. It's also facing headwinds from customers' near-term preference for trading equipment in the spot market, which boosts idle time exposure. That said, these headwinds should abate as 2018 progresses as providers across the industry retire old barges and Kirby's inland and coastal shipment volume enjoys an incremental lift from favorable trends in U.S. petrochemical production. Further, Kirby's land-based diesel engine unit is seeing a robust rebound in demand for pressure pump remanufacturing thanks to improved drilling activity among energy end-market customers.