EUR 850.00 For Business Accounts Only

Morningstar | Kirby’s 3Q Mostly In Line; Inland Barging Healthy, With Hints of Coastal Improvement

Tank barging specialist Kirby’s third-quarter revenue expanded to $705 million from $541 million a year ago, primarily driven by the third-quarter 2017 S&S acquisition (equipment and distribution services), first-quarter 2018 Higman deal (marine), and improvement in the inland barging unit. Overall, revenue and margins didn’t deviate drastically from our expectations. Since our midcycle model assumptions remain intact, we are maintaining our $66 DCF-derived fair value estimate. The shares are trading in fairly valued territory.

The flagship inland marine business has improved in recent quarters on the back of increased utilization and modest term contract rate gains, which are being supported by healthy petrochemical and black-oil product shipment demand. Inland spot pricing increased 20% year over year in the third quarter, and term contract renewals are pricing higher as well. The coastal marine business continues to grapple with unfavorable term and spot-market pricing conditions linked to oversupply, but management noted it’s seeing initial signs of recovery, including refinery turnarounds in the Atlantic region. Coastal spot rates were flat relative to the same period last year, but several term contracts did manage to price higher.

Kirby’s recently expanded distribution and services division has been enjoying rising activity for new pressure pumping units and remanufacturing services most of this year, but during the third quarter, the company saw headwinds from vendor supply chain constraints, which is delaying product deliveries. Management remains optimistic about D&S growth potential for 2019 given expected increases in oilfield activity among oil and gas customers.