EUR 850.00 For Business Accounts Only

Morningstar | Winter Weather Tempers Kirby's 1Q, but Marine Segment's Growth Outlook Remains Positive

Tank barging specialist Kirby’s first-quarter top line was roughly flat year over year and slightly below our expected run rate due to weather-related disruption, including fog along the Gulf Coast and ice on the Illinois River. However, those conditions should improve in the quarters ahead. Relative to the same period last year, acquisitions contributed to growth, underlying demand strengthened for the inland marine operations, and spot and contract pricing is on the rise. However, those factors were offset by weather headwinds and the recent pullback in distribution and services segment activity among oilfield customers. Since our midcycle model assumptions are largely intact, we don’t expect to materially alter our $66 fair value estimate. The shares are trading in modestly overvalued territory.

Kirby’s flagship inland marine business (up 8%) benefited from utilization improvement into the mid-90s during the quarter, along with higher spot and contract pricing, supported in part by healthy petrochemical product shipment demand. The coastal marine division has grappled with oversupply over the past few years but has seen signs of recovery emerge in recent quarters, including higher spot and contract pricing. That said, in the first quarter, coastal revenue fell slightly year over year because of higher shipyard days and weather delays. Coastal revenue should rebound and swing positive in the second quarter. Kirby’s recently expanded (via the 2018 S&S deal) D&S division’s top line fell 6% on softening activity in oil and gas customers' lower demand for diesel engines and new/overhauled transmissions. On the positive side, demand for backup power systems and specialty equipment rentals is solid and should persist.