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Yahoo
06-04-2025
- Business
- Yahoo
Is Kirby Corporation (KEX) the Best Marine Shipping Stock to Invest in Now?
We recently published a list of . In this article, we are going to take a look at where Kirby Corporation (NYSE:KEX) stands against other best marine shipping stocks to invest in now. According to Dr. Shashi Kumar of the US Naval Institute, geopolitical developments tend to have a greater impact on the highly volatile shipping market compared to market forces. Since the 2007–08 financial crisis, the broader global shipping market continues to face a series of new challenges. However, the challenging conditions this industry faced in 2024 were unmatched over the past decade and a half, says Kumar. The year's challenging conditions included the prolonged war in Ukraine, wanton Houthi attacks in the Red Sea as well as increased tensions in the South China Sea. Kumar also noted that container ships decided to avoid the Suez Canal and chose to transport goods around southern Africa, which increased transit time and greenhouse gas emissions. Despite this, the owners of these container ships saw a profitable year. The marine vessels market is expected to reach US$133.63 billion by 2030 from US$111.10 billion in 2024, as per Research and Markets. While global trade continues to fuel the demand for different types of ships, the military navy growth has also been lending support to expand the market. Notably, the requirement for larger and more versatile vessels stems from the demand for efficient transportation of goods. Also, increasing passenger and tourism needs continue to fuel fleet expansion and technology upgrades. The firm believes that several cruise lines have been adding more ships to cater to the needs of travelers focusing on unique experiences. Overall, the strategic fleet renewal remains critical for market improvement. New and fuel-efficient vessels have been supporting to meet environmental standards and lower costs, says Research and Markets. The transition towards sustainable shipping practices continues to become more critical to obey the international rules targeting reduced emissions. READ ALSO: and . Research and Markets believes that cargo vessels continue to become a critical part of commercial shipping. Such vessels tend to play a vital role in global trade by transporting numerous goods across the seas. With the demand for faster and more reliable shipping increasing, the broader industry remains focused on adopting new technologies. Notably, modern navigation systems, eco-friendly fuels, and automation tend to enhance efficiency, improve safety, and reduce the environmental impact. Therefore, as global trade has been expanding, cargo vessels remain critical when it comes to international commerce and economic growth. To list the 11 Best Marine Shipping Stocks to Invest in Now, we used a screener to shortlist the companies catering to the broader marine shipping industry. Next, we mentioned the hedge fund sentiments around each stock, as of Q4 2024. Finally, the stocks were arranged in ascending order of their hedge fund sentiments. Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter's strategy selects 14 small-cap and large-cap stocks every quarter and has returned 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here). A line of dredgers and cranes at a marine transportation Corporation (NYSE:KEX) operates domestic tank barges in the US. Through the marine transportation segment, the company transports petrochemicals, black oil, refined petroleum products, and agricultural chemicals by tank barge. Stifel analysts sustained a 'Buy' rating on the company's stock with a price objective of $135.00. The company's sales of power equipment for data centers were highlighted. As per the analysts, the M&A opportunities in the inland barge market appear to be increasingly tangible, which can act as a catalyst for Kirby Corporation (NYSE:KEX)'s stock. The company continues to experience a strong demand throughout its business segments. Its emphasis on the inland barge market, together with its strong sales in power equipment, places it well in the industry. The firm's report demonstrated confidence in Kirby Corporation (NYSE:KEX)'s operational strength and its growth potential, mainly given the possible impact of strategic acquisitions. For FY 2024, it saw net earnings attributable to the company of $286.7 million or $4.91 per share as compared to $222.9 million or $3.72 per share for 2023. Overall, Kirby Corporation (NYSE:KEX)'s barge utilization rates averaged in the 90% range for Q4 2024. During the quarter, the stable customer demand, together with continued limited availability of large capacity vessels, led to mid-to-high-20% YoY increases on term contract renewals as well as average spot market rates that increased in the low teens range YoY. Overall, KEX ranks 1st on our list of best marine shipping stocks to invest in now. While we acknowledge the potential of KEX as an investment, our conviction lies in the belief that some deeply undervalued AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. There is an AI stock that went up since the beginning of 2025, while popular AI stocks lost around 25%. If you are looking for a deeply undervalued AI stock that is more promising than KEX but that trades at less than 5 times its earnings, check out our report about this cheapest AI stock. READ NEXT: and . Disclosure: None. This article is originally published at .
Yahoo
31-01-2025
- Business
- Yahoo
Q4 2024 Kirby Corp Earnings Call
Kurt Niemietz; Vice President - Investor Relations, Treasurer; Kirby Corp David Grzebinski; President, Chief Executive Officer, Director; Kirby Corp Raj Kumar; Chief Financial Officer, Executive Vice President; Kirby Corp Christian O'Neil; President - Kirby Inland Marine, Kirby Offshore Marine, San Jac Marine, LLC, and Kirby Offshore Wind, LLC; Kirby Corp Ben Nolan; Analyst; Stifel Nicolaus and Company, Incorporated Ari Rosa; Analyst; BofA Global Research Sherif Elmaghrabi; Analyst; BTIG Greg Wasikowski; Analyst; Webber Research & Advisory LLC Operator Good morning, and welcome to the Kirby Corporation 2024 fourth quarter earnings conference call. (Operator Instructions) Please note, this event is being recorded. I would now like to turn the conference over to Mr. Kurt Niemietz. Kirby's Vice President of Investor Relations and Treasurer. Please go ahead. Kurt Niemietz Good morning, and thank you for joining the Kirby Corporation 2024 fourth quarter earnings call. With me today are David Grzebinski, Kirby's Chief Executive Officer; Christian O'Neil, Kirby's President and Chief Operating Officer; and Raj Kumar, Kirby's Executive Vice President and Chief Financial Officer. A slide presentation for today's conference call as well as the earnings release, which was issued earlier today can be found on our website. During this conference call, we may refer to certain non-GAAP or adjusted financial measures. Reconciliations of the non-GAAP financial measures to the most directly comparable GAAP financial measures are included in our earnings press release and are also available on our website in the Investor Relations section. As a reminder, statements contained in this conference call with respect to the future are forward-looking statements. These statements reflect management's reasonable judgment with respect to future events. Forward-looking statements involve risks and uncertainties, and our actual results could differ materially from those anticipated as a result of various factors. A list of these risk factors can be found in Kirby's latest Form 10-K filing and in our other filings made with the SEC from time to time. I will now turn the call over to David. David Grzebinski Thank you, Kurt, and good morning, everyone. Earlier today, we announced fourth quarter GAAP earnings per share of $0.74, which included a onetime charge of $0.74 related to a noncash write-down of inventory in our distribution businesses, which was partially offset by a onetime credit for a change in Louisiana tax law of $0.19. Excluding these onetime items, which Raj will provide more detail on later, adjusted earnings for the quarter were $1.29 per share. Our fourth quarter results reflected some seasonal softness in both Marine Transportation and in distribution and services as we experienced weather and navigation challenges for marine and typical seasonal slowness in activity in distribution and services. These headwinds were offset by good execution from our teams in both segments during the quarter, and that drove strong year-over-year financial performance with adjusted earnings per share up 24% year over year. We also generated over $151 million of free cash flow in the quarter, which was used to further strengthen our balance sheet by paying down $105 million in debt and to buy back $33 million of stock. We ended the year on a good note, and we anticipate strong growth in 2025. In inland marine transportation, we experienced normal headwinds from poor operating conditions and a slight slowdown in some trade lanes during the quarter. From a demand standpoint, refinery activity dipped in the early part of the quarter. However, activity began to pick up and tighten utility as we exited the quarter. Overall, our barge utilization rates averaged in the 90% range for the quarter. Spot prices were flat to slightly down sequentially, but we're up in the high single-digit range year over year. More importantly, our term contract renewals were in line with our expectations with high single-digit increases versus a year ago. Fourth quarter inland operating margins were approximately 20%. In coastal, market fundamentals remained steady with our barge utilization levels running in the mid- to high 90% range. During the quarter, stable customer demand, combined with a continued limited availability of large capacity vessels resulted in mid- to high 20% year-over-year increases on term contract renewals and average spot market rates that increased in the low teens range year over year. Planned shipyards impacted the quarter with fourth quarter coastal revenues increasing only 6% year over year, with an operating margin in the low teens. Turning to distribution and services. demand was mixed across our end markets with growth in some areas offset by Clovis or delays in others. In Power Generation, total revenues grew 16% sequentially and 36% year over year. The pace of orders was strong, adding to our backlog with several large project wins from major backup power and industrial customers as the need for power remains critical. In oil and gas, revenues were down 38% year over year and 24% sequentially, driven by a very soft conventional oil and gas business. This was partially offset by some growth in our e-frac business. In our commercial and industrial market, even though revenues were down 7% year over year, driven by softness in on-highway truck service and repair, operating income was up 28% year over year due to favorable product mix and ongoing cost control initiatives. In summary, while our fourth quarter results were challenged by temporary seasonal issues, the underlying market fundamentals for both segments remain positive. So far in the first quarter, we have seen inland utility improve, which is helping firm up spot prices overall, with rates in some trade lanes starting to push higher. In coastal, industry-wide supply demand dynamics look very favorable for the years to come. Our barge utilization is strong, and we are realizing strong rate increases. In distribution and services, demand continues to grow for our power generation and is mostly offsetting softness in the legacy oil and gas arena. All in all, we have a very favorable outlook for our business as we look into the coming year. I'll talk more about our outlook later, but first, I'll turn the call over to Raj to discuss the fourth quarter segment results and the balance sheet. Raj Kumar Thank you, David, and good morning, everyone. In the fourth quarter of 2024, Marine Transportation segment revenues were $467 million and operating income was $86 million with an operating margin around 18%. Compared to the fourth quarter of 2023, total marine revenues, inland and coastal combined increased 3% and operating income increased 26%. Total marine revenues decreased by 4% compared to the third quarter of 2024. The weather and lock delays meaningfully impacted our operations at the beginning of winter weather, combined with lock maintenance of a few high-traffic trade routes drove a 30% sequential increase in delay days during the fourth quarter. Looking at the inland business in more detail. The inland business contributed approximately 82% of segment revenue. Average barge utilization was in the 90% range for the quarter, which was in line with the fourth quarter of 2023 as well as the third quarter of 2024. Long-term inland marine transportation contracts or those contracts with a term of one year or longer, contributed approximately 65% of revenue, with 63% from time charters and 37% from contracts of affreightment. Slower market conditions early in the quarter contributed to spot market rates that were flat to slightly down sequentially but increased in the high single-digit range year over year. In contrast, our term contracts that renewed during the fourth quarter were up on average in the high single-digit range compared to the prior year. Compared to the fourth quarter of 2023, inland revenues increased 3%, primarily due to higher term and spot contract pricing. Inland revenues decreased 3% compared to the third quarter of 2024. Inland operating margins were right around 20%, driven by the benefit of higher pricing and ongoing cost management which help blunt lingering inflationary pressures. Margins fell sequentially as expected, given the challenging operating conditions caused mainly by weather and lock delays and seasonal softness in refinery activity we experienced in the early part of the quarter. Now moving to the coastal business. Coastal revenues increased 6% year over year driven by higher contract prices that were partially offset by an increase in shipyards. Overall, coastal had an operating margin in the low teens range, benefiting from higher pricing and partially offset by shipyard timing. Given the high number of planned shipyards on the schedule, the margin headwind from shipyard is expected to linger into the first quarter of 2025 before improving as we move through the balance of 2025. The coastal business represented 18% of revenues for the Marine Transportation segment. Average coastal barge utilization was in the mid- to high 90% range which improved from both the fourth quarter of 2023 and the third quarter of 2024. During the quarter, the percentage of coastal revenue under term contracts was approximately 100% of which 99% were time charters. Average spot market rates were up in the low teens range year over year and renewals of term contract prices were higher in the mid to high 20% range on average year over year. With respect to our tank barge fleet for both the inland and coastal businesses, we have provided a reconciliation of the changes in the fourth quarter as well as outlook for the full year of 2025. This is included in our earnings call presentation posted on our website. At the end of the fourth quarter, the inland fleet had 1,094 badges, representing 24.2 million barrels of capacity and is expected to increase slightly in 2025. Coastal Marine is expected to remain unchanged for the year. Now I'll review the performance of the Distribution and Services segment. Total segment revenues for the fourth quarter of 2024 were $336 million with an operating income of $27 million and an operating margin of 8%. During the fourth quarter of 2024, the company recorded a $56.3 million noncash inventory impairment charge in the Distribution and Services segment, primarily related to weak market conditions for conventional diesel fracturing equipment. This was based on current market conditions and our view on the industry outlook, which includes decreased customer demand for conventional diesel fracturing equipment driven by an industry-wide shift to electric fracturing equipment. As such, the company determined that certain inventory had limited commercial opportunity and the carrying value of these inventories were accordingly adjusted. Compared to the fourth quarter of 2023, the Distribution and Services segment revenue decreased 3%, while operating income decreased 7% due to lower revenues and mix. When compared to the third quarter of 2024, segment revenues decreased by 3% and operating income decreased by 12%. Moving to the segment in more detail. In power generation, our revenues tied to industrial end markets were up 38% year over year. We continue to see significant power generation orders resulting in higher backlog from backup power, data centers and other industrial applications. Our power generation revenues tied to the energy space were up 160% sequentially and 34% year over year as some shipments caught up from previously delayed product orders. Altogether, total power generation revenues were up 36% year over year and operating -- with operating margins in the high single digits. Power generation represented 39% of total segment revenues. On the commercial and industrial side, steady activity in marine repair partially offset lower activity in other areas, particularly on-highway truck service. As a result, Commercial and Industrial revenues were down 7% year over year. Even though revenues in C&I were down year over year, favorable product mix and ongoing cost savings initiatives drove a 28% year-over-year increase in operating income. C&I made up 45% of segment revenues and had operating margins in the high single digits. In the oil and gas market, we continue to see softness in legacy conventional frac-related equipment as lower rig counts and lower fracking activity tempered demand for new engines, transmissions, service and parts throughout the quarter. This softness is being partially offset by solid execution on backlog and new orders of e-frac related equipment. Revenues in oil and gas were down 38% year over year and 24% sequentially while operating income was down 58% year over year and 31% sequentially. Oil and gas represented 16% of segment revenue in the fourth quarter and had operating margins in the mid- to high single digits. Now I'll turn to the balance sheet. As of December 31, we had $74 million of cash with total debt of around $875 million and our debt-to-cap ratio improved to 20.7%. During the quarter, we had net cash flow from operating activities of around $247 million. Fourth quarter cash flow from operations benefited from a working capital reduction of approximately $82 million. We used cash flow and cash on hand to fund $97 million of capital expenditures or CapEx primarily related to maintenance of marine equipment. Free cash flow generation during the quarter was just over $150 million. We used $33 million to repurchase stock at an average price of $116 and reduced our debt by around $105 million, further strengthening our balance sheet. As of December 31, we had total available liquidity of approximately $583 million. For all of 2024, we generated cash flow from operations of $756 million, driven by higher revenue and earnings. We still see some supply constraints, especially in the power generation space, posing some headwinds to managing working capital in the near term. Having said that, our teams executed well throughout 2024, and we unwound $93 million of working capital for the year. With respect to CapEx, our total capital spending was $343 million for 2024. Approximately $230 million was associated with marine maintenance capital and improvements to existing inland and coastal marine equipment and facility improvements. Approximately $110 million was associated with growth capital spending in both of our businesses. For 2025, we expect CapEx to fall into the $280 million to $320 million range. Altogether, we generated $414 million of free cash flow for the year, which exceeded the high end of our guidance driven in part by favorable working capital release. We expect 2025 to be another good year for free cash flow generation. As always, we are committed to a balanced capital allocation approach and we'll use this cash flow to return capital to shareholders and continue to pursue long-term value-creating investment and acquisition opportunities. I will now turn the call back to David to discuss our 2025 outlook. David Grzebinski Thank you, Raj. While we manage through challenging operating conditions in the fourth quarter, we ended in a very strong position in our businesses. Refinery activity is starting to increase. Our barge utilization is improving in inland and spot rates are beginning to pick back up. While we expect typical seasonal weather conditions to propose some near-term headwinds in the first quarter and high levels of shipyard activity to linger near term and coastal our outlook in the marine market remains strong for the full year. In distribution and services, demand is expected to remain mixed across our products and services and our actions taken over the past few years to limit volatility of this segment are paying off. For D&S, we expect flat to slightly lower results for the segment despite a very tough oil and gas market. For Kirby overall, we expect our businesses combined. We'll deliver another strong year of financial growth in 2025, with a 15% to 25% increase year over year in earnings per share. Moving to specific detail on the segments. In inland marine, we anticipate positive market dynamics due to limited new barge construction. The demand softening we saw in the refinery sector in the fourth quarter has improved and barge utilization rates are firming up. We expect our barge utilization rates to be in the low to mid-90% range for the year with continued improvement in term contract pricing as renewals occur throughout the year. However, we continue to see inflationary pressures, and there remains an acute mariner shortage in the industry, which continues to drive up labor costs. These pressures, along with the increasing cost of equipment should continue to put upward pressure on spot and contract pricing. Overall, inland revenues are expected to grow in the mid- to high single-digit range for the full year. As we usually see, normal seasonal winter weather has started and is expected to be a headwind in revenues and margins in the first quarter. However, we expect operating margins will gradually improve during the year with the first quarter being the lowest and the average for the full year, up 200 to 300 basis points. In coastal, market conditions remain favorable and supply and demand remained balanced across the industry fleet. Steady customer demand is expected to keep our barge utilization in the mid-90% range. Revenues for the full year are expected to increase in the high single to low double-digit range compared to 2024, driven by higher pricing on contracts. Coastal operating margins are expected to be in the mid-teens range on a full year basis with the first quarter the lowest due to weather in a high number of planned shipyards. In the Distribution and Services segment, we see mixed results as near-term volatility driven by supply issues, customers deferring maintenance and lower overall levels of activity in oil and gas is partially offset by orders for power generation. In commercial and industrial, the demand outlook in marine repair remains steady, while on-highway service and repair remains weak in the current environment, although the on-highway market feels close to bottoming from the trucking recession. In oil and gas, we expect revenues to be down in the high single to low double-digit range as the shift away from conventional frac to e-frac continues to take place and customers continue to maintain considerable capital discipline. In power generation, we anticipate continued strong growth in orders at data center demand and the need for backup power is very strong. We expect extended lead times for certain OEM products to continue contributing to a volatile delivery schedule of new products throughout 2025. Overall, the company expects total segment revenues to be flat to slightly down for the full year with operating margins in the high single digits, but slightly lower year over year. To conclude, overall, 2024 was a record year for earnings, and we have a favorable outlook as we look to this year and beyond. A lack of meaningful new build of equipment in marine has supply and check and we continue to receive new orders for power generation equipment as we manage through supply issues. Our balance sheet is strong, and we expect to generate significant free cash flow in 2025. We expect our businesses will produce solid financial results in 2025 with higher margins and strong earnings growth for the year, and we see good fundamentals continuing as we look out to the next few years. Operator, this concludes our prepared remarks. Christian, Raj and I are ready now to take questions. Operator (Operator Instructions) Daniel Imbro, Stephens. This is [Reed] on for Daniel. I just want to first look at pricing. When we look at the puts and takes here so far in the first quarter, we have difficult weather, some better refinery activity. Can you talk about all the puts and takes and what is driving that improved pricing? And once we move past this difficult weather, what gives you the confidence that we can continue to get strong pricing through the year? Along with maybe some update on the competitive trends you're expecting in 2025. David Grzebinski Sure. Reed, thanks for the question. Chris and I'll tag team this a bit. But look, we did see a little -- as Christian will tell you, a speed bump in the fourth quarter, we saw utility pull back a little bit as refiners cut back. I think utility got down into the 90%, right around 90% range. We saw spot pricing weaken a little bit for us. It was down 0% to 2%. That is all abated now where our utilities up. But Christian can share some recent utility numbers. The refineries are back that speed bump went away. So we are very tight in terms of supply and demand right now. And that, as you know, drives pricing. And Christian will give you a little more color on that. Why don't you go ahead and do that, Christian, and I'll circle back on the other part of the question. Christian O'Neil Yes, sir. Thanks, David. You saw the typical winter weather patterns that tend to affect Q4 and Q1. Funnel passages, fog, maybe a little ice format on the Illinois River. And around the election, I think David characterized it well. We saw -- but we began to talk about in-house here as a speed bump. However, as the election played out and people got back to work, the holiday season was a bit long with the way the holidays fell. We saw some trading activity slowdown. I can tell you today, as a snapshot in time standing here, we have seen utility recover. We have seen spot pricing recover very nicely, and so that's why we characterize it as a speed bump. We did see a bit of a softness in refining activity in some of our core refiners. However, I can tell you today, looking at the numbers we're seeing it rebound back nicely in Q1. David Grzebinski Yes. And really, the second part is weather. Look, weather does help tighten up utility, Usually, we get a couple of percent extra utility with weather. We don't always get paid for that extra utility then that's why it impacts the margin. But look, first quarter is always our lowest in terms of margin on the inland side. I think the big picture is don't focus on the first quarter, focus on what we're telling you for the full year in terms of in the margins. And we've said they'll be up 200 to 300 basis points. We're pretty excited about where we are. Christian is being modest. I mean, we were, I think, the last week or so, we've been at 95%, 96%. I think we even bumped 97% utility, which is for us, sold out. So even if weather starts to get better and that comes down a couple of percent from better weather, we'll still be really tight in terms of utility. That's why we're so constructive about the pricing environment, and that's all driven by supply and demand. I mean there's not a lot of new supply and demands back after that little speed month we had in the first quarter -- or the fourth quarter. Christian O'Neil And I would just add to that, David, we had a nice term renewal cycle in Q4. You'll begin to see that pay dividends in 2025 as we referenced on the conference call. Those term contracts that were new in the fourth quarter, high single digits year over year, and you'll have that momentum going into 2025 as well. Very helpful. Just shifting to the cost side. You talked about mariner wage inflation and equipment inflation. Do you have an expectation for 2025 and where you see that going? David Grzebinski Yes. No, I'm glad you brought that up, Reed. That's another reason spot pricing is going to go up this year. We have inflation. Inflation -- a lot of discussion in the economy these days. And we see it the industry, not just Kirby, it's very tight on mariners we have a slight advantage because we have our own school and we produce our own mariners. But it is very tight. And so that's obviously putting wage inflation into the picture. But the inflation is more broad-based than just that, and I'm not talking about the price of eggs, which seems to get a lot of attention these days. It's the shipyards, the shipyards that we use day in and day out they're busy, one, two, they have the same labor constraints. They used to run three shifts, 24/7, and they're having problems filling out that last shift. So they've got some labor pressure, things like radars and anything electronic, we've seen inflation. So that -- we said all that last year, so I'm not giving you anything new, but what I would tell you is it hasn't abated. It's still there. And frankly, that's why we need the pricing to continue to march up to offset some of that inflation, which is real. Frankly, our competitors and our customers understand it. They get it because they're dealing with it too. So it's there in terms of quantifying it, it's hard for us to give you a precise number on inflation. But again, if you look at that 200 to 300 basis point improvement in inland margins, that incorporates both price increases plus the inflation area increases. Operator Ben Nolan, Stifel. Ben Nolan So if I could pick up -- if I can pick up on the barge side real quick. As we look forward, there's a couple of unique things that are going on a little -- or somewhat unique, and I was going to hope to get your comments on. First of all, do you have any perspective on if there are tariffs on Canada and Mexico, what that -- are there any implications for the barge industry? And then also, I saw yesterday, Lyondell say they were closing a refinery in Houston. Is that a needle mover at all for you guys? Just any color on some of those things that are just happening in the market on your business? David Grzebinski Sure. I'll let Christian handle the Lyondell question, but let me just talk broadly on tariffs. It's an interesting thing with tariffs. So far, it looks like the administration is using it as a negotiation tool rather than anything broad-based. Our view from a marine side is tariffs, although we're very pro-business and don't like a lot of tariffs, but if they happen, it's generally good for Kirby in that. We're essentially 100% domestic that would drive more onshoring and more activity in the US. So we'd probably benefit from that. Again, it would also could be inflationary, depending on how robust the tariffs would be. Inflation is not necessarily bad for us. We work hard to offset it. But we have a huge installed base of equipment and inflation would make -- replacing that equipment more expensive, which would, in my view, extend the cycle even further than we think it would be because it would be that much more expensive to replace or add new equipment. Christian, why don't you tell them about what's going on? It's delicate for us to talk about a specific customer, but Christian can give you some color on that. Christian O'Neil Yes, in regards to the refinery in Houston, while we do service it, and it is part of our demand. What you tend to see, and I've seen this over the years when other refinery of chemical plants shut down or may exit the service as you begin to see the logistical feedstock or finished product supply that, that refinery serviced start to come from other places. The end customers who needed that chemical or those refined products or the feedstock come from other places in the market. At times, I've seen that be a benefit to the barge business as logistics change and the ton miles that you have to travel to service, the same customers with refined products, it can actually be a positive. In terms of barge days that it takes to service the markets that, that refinery used to market. That said, we never like to see refining capacity exit the market. But I think I'm not a refiner but I will tell you, I think the rationalization of some of this older refining capacity in the United States is probably a good thing for many of our customers that operate global world-scale refineries, they will pick up this demand from the exit of this older refinery. So I think while we don't like to see the volumes go away day to day, I'm not sure it has any dramatic impact to what we do in the Houston Harbor, and you may actually see opportunities that arise out of new trade lanes. Ben Nolan Great. That's very helpful. I appreciate both of those answers. And then for my second question, I was hoping it sounds like the power business is humming along, particularly in the fourth quarter. As you -- well, first of all, can you give any context on how the backlog build? And maybe any color on how you maybe anticipate that growing over the course of the year or very at least maybe contextualize the conversations you're having with customers and how you think that power business might fare over the course of the year? David Grzebinski Sure. Christian and I'll split this question a little bit here. Look, power gen is a real thing. The data center demand is real. Even our e-frac side is real. We are seeing orders continue. I'll let Christian give you some color on the backlog, although we don't like to give a specific backlog number. But it's lumpy, Ben. Obviously, it's growing. You can see that in our numbers. It's offsetting the weakness in conventional oil field, but it's lumpy. Picture this, a data center or it could be, call it, $30 million to $50 million worth of equipment. They want it all at once. The supply chain takes a few quarters to get that going. And then it's a lumpy delivery. So when you look at our quarterly progression this year, it could be lumpy because of that. First quarter, we don't really have any big data center deliveries. But second quarter, we should have some big deliveries. So it will be lumpy, but the overall trend is growing, and I'll let Christian give you some color on backlog. Christian O'Neil Thanks for the question, Ben. Thank you, David. If you frame up our power gen journey, four years ago, you had a backlog numbers in the tens of millions of dollars. While we don't discuss backlog to the dollar here, I would tell you that going into 2025, 80% of our backlog power gen. It's in the hundreds of millions of dollars in backlog. My good friend, [Chad], who manages our power gen business and does a great job, told me something interesting the other day. This year, we will deliver our -- we will hit the milestone of delivering 1 gigawatt of natural gas power generation products into the market. So that's a significant milestone for D&S. I think it shows you the momentum and the market penetration that we're enjoying as a player in this market. It is dynamic. It is lumpy as the revenue flows through, as David mentioned. But we do see the backlog. We're excited about it, and we're building out a very good team to capitalize on it. Operator Kenneth Hoexter, Bank of America. Ari Rosa It's [Ari Rosa] on for Ken Hoexter. Maybe to look a little despite seasonal pressure, still strong inland supply and demand dynamics. You've spoken about a 200 to 300 basis point long-term margin improvement opportunity. Could you just provide some color on where rates are and what -- where rates would need to go to justify significant new builds or capacity additions and how you're looking at that over the next couple of years? David Grzebinski Yes, you bet. I can't really give you specific market pricing because the attorney in the room will kill me. So that said, look, we had the little speed bump that Christian and I have described in the fourth quarter. We saw spot pricing decline 0% to 2%, which is barely negligible. We're seeing that -- we've already regained traction there here so far in January. But it's early days. You've got to let it play out for the year. That said, spot pricing is well above term. It's probably in the order of 10% above term right now. We like that. That's a healthy market. when it gets really sporty, it could be 15% above of term. It may be on that way now, but right now, it's 10% above term. And then if you look at where pricing needs to go to justify building new equipment for a two barge toe, it's got to increase probably 40% from where we are now and that's a code. A two barge toe would need to be, I'm saying in the $14,000 a day rate thing. Look, our competitors understand that. And as Christian mentioned, there's a lot of discipline in terms of new construction right now. It just doesn't make sense to build new equipment. What little building is happening is entirely for replacement right now. So that's our estimation. We don't know exactly what our competitors are doing. But our estimation is it's all for replacement. To do -- build new capacity, we need significant rates improvement. Ari Rosa Got it. That's helpful. Then maybe just a little bit more on this year. You noted you expect 1Q to be the trough given some of these temporary seasonal pressures. Is it -- any color on just how much of a trough it is. And really, I'm thinking about seasonality for the rest of the year. Typically, you have a little bit of a bump in the second and third quarters, but maybe fall back down in the fourth. Is there anything unique happening on first quarter to impact any of that seasonality or just any thoughts? David Grzebinski Sure. No. You've got the seasonality right. I mean the first quarter is usually the lowest. Second and third quarter pick up nicely. Third quarter is usually the highest. Fourth quarter dips back down a little bit, but not as low as first quarter. That's the normal seasonality. We expect that this year. The only other caveat would be for our coastal business. We have a very heavy first quarter shipyard cycle. They'll start unwinding in the second quarter. So that will impact it. But coastal is rocking right now, I say rocking, it's probably too strong of a term, but it's doing really well. We're essentially sold out and the fleet is performing well. We just have that normal required shipyard maintenance, and we're going to go through it. So that will help the out quarters. It will help second, third and fourth quarter for coastal once we get some of these big shipyards behind us. So that would be the only other seasonal factor that I can add. Anything else, Christian? Christian O'Neil No, David, that was well said. We're seeing the normal seasonality in Q1. You've got a little bit of ice form in the Illinois River. You've got some lock outages. You've got some bridge construction going on, but really nothing in Q1 that is beyond our typical normal winter weather battle. It will be the trough but we see things recovering very nicely out of the quarter, and we're actually very optimistic about the rest of the year. Ari Rosa And just one clarifying -- you noted the gap I believe, on the inland side is about 10% spot to term. Is that the same across coastal, I mean with the spot of low teens and terms up high 20%. Is that the same dynamic as well? David Grzebinski Really, we're 100% termed up. So there is really no spot market in coastal right now. So as typically the term contracts are a year in nature, we do have several in our multiyear. So it's really -- as those term contracts renew, pricing will go up. There's really not a lot of spot market at all. I mean, that I'm seeing. And I think that's pretty consistent for most of the industry right now. It is very tight. Christian O'Neil Yes. The only spot market that really exists is maybe the reletting of a term piece of equipment and you will see that at a premium to the term rates because they're shorter duration trips. However, I think David summarized it very well. I mean, the market is all but sold out. And if you look at the percentage increases that we're getting on our offshore renewals, we're getting rate at a clip that we've never seen before. I mean it's pretty big chunks when you're moving rates 20% in a renewal cycle. David Grzebinski But adding, just like on the inland side, we need it, right? There's been inflation. The cost of new equipment has gone up substantially. Just to give you a benchmark number, 185,000-barrel ATB. We built one about five, six, seven years ago in the $80 million range. To build that today, it's $130 million to $135 million. So that's inflation. It's cost of steel, it's cost of construction. It's -- so the rates do need to go up like that to get anywhere close to replacement economics. And everything we've said about supply and demand on the inland side is the same on the coastal side, even worse. Because if you wanted to build a new 185,000-barrel unit today, you would get it until probably the end of '27 maybe in the first part of '28. So we're -- again, we're seeing a long runway here for ourselves, and we're pretty constructive and excited about what's in front of us. Operator Sherif Elmaghrabi, BTIG. Sherif Elmaghrabi First, thinking about the supply of inland barges. You mentioned retirements could keep growth flattish. So given the overall inland fleet is aging. Is it realistic to see barges keep working past that 35-year mark? Or is that viewed as something of a hard cutoff in the industry? David Grzebinski That's a great question. Historically, the age of a barge is driven by the major oil company or the major chemicals betting rules as well as the economic decision, does it make sense to keep investing in a 30-, 35-year-old asset. I'll give you a little color. It's an inexact science, but we saw 75 barges retire in 2024, and we don't know exactly if they retired, but we do know that their certificate of inspections were removed. So that was an average age of 42 years, the barges that retired in that bucket. I think you'll see perhaps one way to adjust to the lack of new construction is for carriers to try to stretch the age of their fleets. Now you will still run up against the betting rules of the major oil companies and the major chemical companies, how they decide to flex or interpret that is still in play. We don't know. But typically, we'll thumb a barge gets to 30 years. I mean that's its useful life. So great question. I would tell you that the carriers like us are still waiting to see how that plays out. Sherif Elmaghrabi That's interesting. And then for my second question, I want to circle back on what Ben was mentioning with power gen. The color on the backlog is very helpful. And Well, just in the last couple of weeks, we've seen a handful of big nat gas partnerships announced. But that's all long lead time stuff, which I imagine lends itself to back up power gen that runs on the same fuel. So I'm wondering, what opportunity you see over the next three-plus years longer term and what you're hearing from customers there? David Grzebinski Yes. Look, our power gen portfolio is multifaceted. So for example, most data centers are diesel backup gens, stationary. They're installed we do stationary backup for New York Stock Exchange, some of the major money center banks in New York, et cetera. So that's one bucket, stationary diesel. Then we have mobile diesel, where we'll will provide mobile backup power generally around storms or ice storms or utility disruptions. Think about on 1 megawatt or 2-megawatt trailer full of backup power that's diesel run that can come to the back of a Walmart or a Target or a Costco and plug in and run the store in a storm type situation. So that bucket for us is growing. You saw our CapEx go up a little bit last year. Because of that, we just need more rental assets. The demand for backup power just continues to grow and having mobile backup power is good. And then you get into natural gas generation, which is it can be mobile or stationary, and that's growing as well. And as you might imagine, natural gas is a lot cheaper than diesel. So there's a lot of excitement around that. We do that as well. A lot of mobile, some stationery. Some of it is -- that goes to customers that sell power by the hour. Some of it is prime power, some of it is backup power. So all of those buckets are growing. It's hard to get too specific without getting into the customers on each one of those buckets. But we're excited about the whole portfolio. I think what we can do is natural gas generation is really exciting because the cost per kilowatt hour is it's not as competitive as, say, a big utility could do, but it is. It's cost effective and being able to sub in there for needs is important and useful to many of the industrial customers that we have. Operator (Operator Instructions) Greg Wasikowski, Webber Research. Greg Wasikowski I want to go back to the order book. I know you guys have talked about it a lot, but it's a point worth hammering home. And David, I think I heard you say this, but worth confirming if we see deliveries in 2025 start to outpace 2024, it's worth hammering home that point that it is expected to be mostly replacement tonnage. That's the first question. And the second is just off that the 40% number for rate to justify building new. We've been at that point for some time now, I want to say probably a couple of years. It's a question that gets asked every quarter. It's a question that we get all the time and it's -- the answer is 30%, 40% all the time. What needs to change in order for that to not be the answer anymore? And really, that's getting at what do we and investors and people who are following the stock need to look for in order to start getting nervous or better pose what do they not need to look for in order to remain calm?It's a -- I hope you're getting it. So yes, I'll stop there. David Grzebinski No, it's a fair question because that 30%, 40% need is something, I've said for to your point, the last two, three, four years. But I said around $14,000 a day for a two barge toe right now to justify. I think probably three years ago, I would have said 12,000. So why does it go up? The cost of a barge has gone from -- well, five years ago, it was probably $2.5 million for a 30,000 barrel large. Now it's probably, as Christian just mentioned, I think $4.5 million for a 30,000 barrel clean barge. And then that's the barge side. What's driven the cost up there steel prices for sure, but that's only about 30% of the input. But it's labor cost, it's welding, it's all the paint cost, all that has gone up. And then you go to the boat side, and we've gone from Tier 2, Tier 3 boats to now Tier 4. So Tier 4, one cost more to operate you have all kinds of considerations for it. The engines are more expensive. The operation of the boats are more expensive. It's at least on just a regular tow boat that added about $1 million in cost. So -- and then just financing equipment has also gone up. So we usually talk when we talk about pricing, unlevered returns, but for many of our competitors, they've got leverage and the cost of borrowing has gone up. So you put all that together, and that's why the breakeven cost continues to rise. So even though we're getting some price increases, that delta really hasn't closed. Now I'm going to turn it back to Christian. He has very specific numbers on '24 build and retirement and then 25 what our crystal ball is hearing. Christian O'Neil Yes. Thanks, David. Regarding the barge order book, it's a bit of an inexact science, but we do have really good information. We're looking at what we think was about 34 barges delivered in 2024. We know the majority of these barges were replacement. There's probably about another 10 barges that are going to slide into 2025 that we're in. The order book is probably in the 40s and those will slide into this year. The 2025 order book, we think, is lined up to be about 50 to 60 inland barges. But I will tell you that at 50 to 60 new construction orders, the present shipyard capacity that can build a high-quality inland tank barge is full. If you wanted to build another bars beyond that 50 or 60, you're well into 2026 to get delivery. So I think the capacity to build inland barges in the United States is diminished from what it was once a point of time when we saw the hyperaggressive building during the days of chasing the shale crude barrel. So supply is as in check as I've ever seen it in my 28 years. And so I think even at an increase from, say, 30 to 40 barges to 50 to 60 year over year, we feel quite confident that the majority of this is replacement, which puts the industry and the supply side in very, very good shape. On top of that, 20% of the industry will also have to go through a maintenance cycle as the maintenance bubble continues. So we still see a high level of major maintenance that's going to require. And by the way, that bubble comes back in 2028 in a big way. So I think when you compound all that or add all that together, you've got a supply side that looks as good as we've ever seen it, as I've ever seen it. And you're clipping along at 75 barges retired in 2024. And if you take that 40, 41, 42-year-old barge group as a group, I mean you still got 500-plus barges that need to retire in the next five years. So I think when you bake all that together, supply sizes and check as we've ever seen it. Greg Wasikowski That's really helpful. A question we've gotten I'm curious to hear your answer is a follow-up to that. still thinking about that 40% number that rates need to go up and the answer to that being the same is that costs have increased along with rates yet Kirby has been able to improve margins rapidly in the last couple of years, while that 40% number has stayed the same, which is a bit of a disconnect, I guess. So -- and the answer might be that yard availability. But what -- can you connect the dots for how you guys have been able to improve your margins even though the costs have been rising generally from an industry standpoint, that 40% number has still remained constant? David Grzebinski Yes. No. I think basically, our price increases have had real price, not just nominal price. And we needed to get there. Look, we're still a long way from rates that get a reasonable return on invested capital. And we work hard. Our job, we believe, for our shareholders is to get a good return on invested capital. So we're trying to outpace the inflation, and we've been making some headway, but we still have ways to go. Anything you want to add, Christian? Christian O'Neil I'd attribute it to the management team. No, we've done a good job of executing through the inflationary environment. I think David summarized it. We're an extremely capitally disciplined company that flows through the DNA and the teams, both Marine and D&S. And we enjoy some really good customer relationships. We have really good dialogue around what inflation looks like to Kirby. They listen. And we've been able to stay above inflation and get real rate. And honestly, our service justifies a lot of that. And I would say that's probably part of why you see us performing on the margin despite the cost environment we're in and the team is doing a great job. David Grzebinski Yes, Christian makes a really good point. We really try and work to save our customers' money. Because of the size of our fleet, we often are able to pull horsepower off to save them money and redeploy that horsepower somewhere else in our system. So they're only just paying for the bars. We work really hard to save them money. So that's all part of the calculus when you come to rates. They know we work hard to save them money, so they'll pay a little more. So don't -- we shouldn't get any more specific than that. But the real answer is we need some real rate increase to get our returns where you as shareholders want to see them. Operator This concludes our question-and-answer session. I would now like to turn the conference back over to Mr. Kurt Niemietz for any closing remarks. Kurt Niemietz Thank you, Shari, and thank you, everyone, for joining the call today. As always, we feel free to reach out to me afterwards. Operator This conference has now concluded. Thank you for attending today's presentation. You may now disconnect. Sign in to access your portfolio
Associated Press
30-01-2025
- Business
- Associated Press
Kirby Corporation Announces 2024 Fourth Quarter and Full Year Results
Fourth quarter 2024 GAAP earnings per share of $0.74, and fourth quarter 2024 adjusted earnings per share¹ of $1.29. Fourth quarter 2024 inland marine term contracts repriced higher in the 6-9% range year-over-year. Kirby repurchased 286,697 shares at an average price of $116.16 for $33.3 million and reduced debt balances by $105 million in the 2024 fourth quarter. 2025 expected earnings growth of 15% to 25% year-over-year. ¹ Non-GAAP measure. See reconciliation in section titled 'One-time Items' HOUSTON, Jan. 30, 2025 (GLOBE NEWSWIRE) -- Kirby Corporation ('Kirby') (NYSE: KEX) today announced net earnings attributable to Kirby for the fourth quarter ended December 31, 2024 of $42.8 million or $0.74 per share, compared with a net earnings of $61.9 million or $1.04 per share for the 2023 fourth quarter. Excluding one-time charges and credits, 2024 fourth quarter net earnings attributable to Kirby were $74.9 million or $1.29 per share. Consolidated revenues for the 2024 fourth quarter were $802.3 million compared with $799.2 million reported for the 2023 fourth quarter. For the 2024 full year, Kirby reported net earnings attributable to Kirby of $286.7 million or $4.91 per share, compared with $222.9 million or $3.72 per share for 2023. Excluding one-time items, 2024 net earnings attributable to Kirby were $318.8 million or $5.46 per share, compared to $223.1 million or $3.72 per share. Consolidated revenues for 2024 were $3.3 billion compared with $3.1 billion for 2023. David Grzebinski, Kirby's Chief Executive Officer, commented, 'Our fourth quarter results included some seasonal softness in both marine transportation and distribution and services, as we experienced weather and navigational challenges for marine and typical seasonal weakness in distribution and services. These headwinds were offset by good execution from our teams in both segments during the quarter that drove strong year-over-year financial performance, with adjusted earnings per share up 24% year-over-year. We ended the year on a good note, and we anticipate strong growth in 2025. 'In inland marine, we experienced normal headwinds with poor operating conditions and a slight slowdown in some trade lanes during the quarter. From a demand standpoint, refinery activity dipped in the early part of the quarter, however, activity began to pick up and tighten utility as we exited the quarter. Overall, our barge utilization rates averaged in the 90% range for the quarter. Spot prices were flat to slightly down sequentially but were up in the high- single digit range year-over-year. More importantly, our term contract renewals were in-line with our expectations with high-single digit increases versus a year ago. Fourth quarter inland operating margins were approximately 20%.' Mr. Grzebinski continued, 'In our coastal marine business, market fundamentals remained steady with our barge utilization levels running in the mid to high-90% range. During the quarter, stable customer demand combined with a continued limited availability of large capacity vessels resulted in mid to high-20% year-over-year increases on term contract renewals and average spot market rates that increased in the low teens range year-over-year. Planned shipyards impacted the quarter with fourth quarter coastal revenues increasing only 6% year-over-year with operating margin in the low teens. 'In distribution and services, demand was mixed across our end markets with growth in some areas offset by slowness or delays in other areas. In power generation, revenues grew 16% sequentially and 36% year-over-year. The pace of orders was strong, adding to our backlog, with several large project wins from backup power and other industrial customers as the need for power remains critical. In our commercial and industrial market, even though revenues were down 7% year-over-year, driven by softness in on-highway truck service and repair, operating income was up 28% year-over-year due to favorable product mix and ongoing cost control initiatives.' Mr. Grzebinski concluded. Segment Results – Marine Transportation Marine transportation revenues for the 2024 fourth quarter were $466.8 million compared with $452.6 million for the 2023 fourth quarter. Operating income for the 2024 fourth quarter was $86.0 million compared with $68.2 million for the 2023 fourth quarter. Segment operating margin for the 2024 fourth quarter was 18.4% compared with 15.1% for the 2023 fourth quarter. In inland, average 2024 fourth quarter barge utilization was in the 90% range. Operating conditions were mostly unfavorable in the quarter with a 30% sequential increase in delay days driven by several lock closures and the onset of seasonal winter weather. During the quarter, average spot market rates were flat to slightly down sequentially and increased in the high-single digit range compared to the 2023 fourth quarter. Term contracts that renewed in the fourth quarter increased on average in the high-single digit range. Revenues in the inland market increased 3% compared to the 2023 fourth quarter primarily due higher pricing and operating margins were approximately 20%. The inland market represented 82% of segment revenues in the fourth quarter of 2024. In coastal, market conditions remained favorable during the quarter, with Kirby's barge utilization remaining in the mid-to high 90% range. Spot market prices increased in the high-single digit range sequentially and term contract renewals increased in the mid to high-20% range year-over-year. Revenues in the coastal market were 6% higher compared to the 2023 fourth quarter and represented 18% of segment revenues. The coastal business operating margin was in the low teens for the quarter. Segment Results – Distribution and Services Distribution and services revenues for the 2024 fourth quarter were $335.5 million compared with $346.6 million for the 2023 fourth quarter. Operating income for the 2024 fourth quarter was $26.8 million compared with $28.7 million for the 2023 fourth quarter. Operating margin was 8.0% for the 2024 fourth quarter compared with 8.3% for the 2023 fourth quarter. In the power generation market, revenues continue to grow as the need for 24/7 power and back up capabilities are critical. Power generation revenues increased 16% sequentially and 36% year-over-year. Overall, power generation revenues represented approximately 39% of segment revenues. Power generation operating margins were in the high single digits. In the commercial and industrial market, revenues decreased 7% compared to the 2023 fourth quarter, while operating income increased 28% over the same period. Revenues decreased primarily due to lower business levels in Thermo King and on-highway businesses due to the ongoing trucking recession. Commercial and industrial represented approximately 45% of segment revenues and operating margins were in the high-single digits. In the oil and gas market, revenues and operating income results were down when compared to the 2023 fourth quarter. Deliveries on orders of pressure pumping equipment and related equipment for electric fracturing were offset by lower activity in conventional frac remanufacturing. Overall, oil and gas revenues decreased 38% compared to the 2023 fourth quarter. Oil & gas represented approximately 16% of segment revenues. Oil and gas operating margins were in the mid to high-single digits. One-time Items During the fourth quarter of 2024, the Company recorded a $56.3 million non-cash impairment charge in the Distribution and Services segment primarily associated with conventional diesel fracturing equipment inventory. Based on the current market conditions and our view on the industry outlook, including decreased customer demand for conventional diesel fracturing equipment driven by an industry-wide shift to electric fracturing equipment, the Company determined that certain inventory had limited commercial opportunity, and the cost of these inventories exceeded its net realizable value. Kirby's 2024 fourth quarter results also included a one-time deferred tax credit related to a change in Louisiana tax law. On December 4, 2024, the governor of Louisiana signed tax reform legislation that included lowering the corporate income tax rate from 7.5% to 5.5% effective January 1, 2025. As a result of the new legislation, the Company recognized a one-time deferred tax credit of $10.9 million in the 2024 fourth quarter due to the remeasurement of the Company's Louisiana and U.S. deferred tax assets and liabilities based on the new effective Louisiana state income tax rate. Cash Generation For the 2024 fourth quarter, Adjusted EBITDA was $172.3 million compared with $149.4 million for the 2023 fourth quarter. Net cash provided by operating activities was $247.4 million, and capital expenditures were $96.7 million. During the quarter, the Company had net proceeds from asset sales totaling $6.6 million. Kirby also used $33.3 million to repurchase stock at an average price of $116.16 and paid down $105 million of debt in the quarter. As of December 31, 2024, the Company had $74.4 million of cash and cash equivalents on the balance sheet and $582.6 million of available liquidity. Total debt was $874.9 million, reflecting a $141.6 million reduction compared to December 31, 2023, and the debt-to-capitalization ratio improved to 20.7%. 2025 Outlook Commenting on the 2025 full year outlook, Mr. Grzebinski said, 'While we managed through challenging operating conditions in the fourth quarter, we ended in a very strong position in our businesses. Refinery activity is starting to increase, our barge utilization is improving in inland, and spot rates are beginning to pick back up. While we expect typical seasonal weather conditions to pose some near-term headwinds in the first quarter, and high levels of shipyard activity to linger near term in coastal, our outlook in the marine market remains strong for the full year. In distribution and services, demand is expected to remain mixed across our products and services, while our actions taken over the past few years to limit the volatility of this segment are paying off, producing flat to slightly lower results for the segment despite a very tough oil and gas market. Overall, we expect our combined businesses will deliver another strong year of financial growth in 2025 with 15-25% year-over-year growth in earnings per share. In inland marine, we anticipate positive market dynamics due to limited new barge construction. The demand softening we saw in the refinery sector in the fourth quarter is starting to improve and barge utilization rates are firming up. We expect our barge utilization rates to be in the low to mid-90% range for the year with continued improvement in term contract pricing as renewals occur throughout the year. However, we continue to see inflationary pressures and there remains an acute mariner shortage in the industry which continues to drive up labor costs. These pressures, along with the increasing cost of equipment, should continue to put upward pressure on spot and contract prices. Overall, inland revenues are expected to grow in the mid to high single-digit range for the full year. As we usually see, normal seasonal winter weather has started and is expected to be a headwind to revenues and margins in the first quarter. However, we expect operating margins will gradually improve during the year, with the first quarter being the lowest, and average 200-300bps higher for the full year. In coastal marine, market conditions remain very favorable, and supply and demand remain balanced across the industry fleet. Steady customer demand is expected to keep our barge utilization in the mid-90% range. Revenues for the full year are expected to increase in the high-single to low-double digit range compared to 2024 driven by higher pricing on contracts. Coastal operating margins are expected to be in the mid-teens range on a full year basis with the first quarter the lowest due to a high number of planned shipyards. In the distribution and services segment, we see mixed results as near-term volatility from supply issues, customers deferring maintenance, and lower overall levels of activity in oil and gas, are partially offset by orders for power generation. In commercial and industrial, the demand outlook in marine repair remains steady while on-highway service and repair remains weak in the current environment although the on-highway market feels close to bottoming from the trucking recession. In oil and gas, we expect revenues to be down in the high-single to low-double digit range as the shift away from conventional frac to e-frac continues to take place. In power generation, we anticipate continued strong growth in orders as data center demand and the need for backup power is very strong. We expect extended lead times for certain OEM products to continue contributing to a volatile delivery schedule of new products throughout 2025. Overall, the Company expects segment revenues to be flat to slightly down for the full year with operating margins in the high-single digits but slightly lower year-over-year. Kirby expects to generate net cash provided from operating activities of $620 million to $720 million in 2025 and capital spending is expected to range between $280 million to $320 million. Approximately $180 million to $220 million is associated with marine maintenance capital and improvements to existing inland and coastal marine equipment, and facility improvements. Up to approximately $100 million is associated with growth capital spending in both our businesses. Conference Call A conference call is scheduled for 7:30 a.m. Central Standard Time today, Thursday, January 30, 2025, to discuss the 2024 fourth quarter performance as well as the outlook for 2025. To listen to the webcast, please visit the Investor Relations section of Kirby's website at For listeners who wish to participate in the question and answer session via telephone, please pre-register at Kirby Earnings Call Registration. All registrants will receive dial-in information and a PIN allowing them to access the live call. A slide presentation for this conference call will be posted on Kirby's website approximately 15 minutes before the start of the webcast. A replay of the webcast will be available for a period of one year by visiting the News & Events page in the Investor Relations section of Kirby's website. GAAP to Non-GAAP Financial Measures The financial and other information to be discussed in the conference call is available in this press release and in a Form 8-K filed with the Securities and Exchange Commission. This press release and the Form 8-K includes a non-GAAP financial measure, Adjusted EBITDA, which Kirby defines as net earnings attributable to Kirby before interest expense, taxes on income, depreciation and amortization, and impairment of assets. A reconciliation of Adjusted EBITDA with GAAP net earnings attributable to Kirby is included in this press release. This press release also includes non-GAAP financial measures which exclude certain one-time items, including earnings before taxes on income (excluding one-time items), net earnings attributable to Kirby (excluding one-time items), and diluted earnings per share (excluding one-time items). A reconciliation of these measures with GAAP is included in this press release. Management believes the exclusion of certain one-time items from these financial measures enables it and investors to assess and understand operating performance, especially when comparing those results with previous and subsequent periods or forecasting performance for future periods, primarily because management views the excluded items to be outside of Kirby's normal operating results. This press release additionally includes a non-GAAP financial measure, free cash flow, which Kirby defines as net cash provided by operating activities less capital expenditures. A reconciliation of free cash flow with GAAP is included in this press release. Kirby uses free cash flow to assess and forecast cash flow and to provide additional disclosures on the Company's liquidity. Free cash flow does not imply the amount of residual cash flow available for discretionary expenditures as it excludes mandatory debt service requirements and other non-discretionary expenditures. This press release also includes marine transportation performance measures, consisting of ton miles, revenue per ton mile, towboats operated and delay days. Comparable marine transportation performance measures for the 2023 year and quarters are available in the Investor Relations section of Kirby's website, under Financials. Forward-Looking Statements Statements contained in this press release with respect to the future are forward-looking statements. These statements reflect management's reasonable judgment with respect to future events. Forward-looking statements involve risks and uncertainties. Actual results could differ materially from those anticipated as a result of various factors, including adverse economic conditions, industry competition and other competitive factors, adverse weather conditions such as high water, low water, tropical storms, hurricanes, tsunamis, fog and ice, tornados, marine accidents, lock delays, fuel costs, interest rates, construction of new equipment by competitors, government and environmental laws and regulations, and the timing, magnitude and number of acquisitions made by the Company. Forward-looking statements are based on currently available information and Kirby assumes no obligation to update any such statements. A list of additional risk factors can be found in Kirby's annual report on Form 10-K for the year ended December 31, 2023. About Kirby Corporation Kirby Corporation, based in Houston, Texas, is the nation's largest domestic tank barge operator transporting bulk liquid products throughout the Mississippi River System, on the Gulf Intracoastal Waterway, and coastwise along all three United States coasts. Kirby transports petrochemicals, black oil, refined petroleum products and agricultural chemicals by tank barge. In addition, Kirby participates in the transportation of dry-bulk commodities in United States coastwise trade. Through the distribution and services segment, Kirby provides after-market service and genuine replacement parts for engines, transmissions, reduction gears, electric motors, drives, and controls, specialized electrical distribution and control systems, energy storage battery systems, and related equipment used in oilfield services, marine, power generation, on-highway, and other industrial applications. Kirby also rents equipment including generators, industrial compressors, high capacity lift trucks, and refrigeration trailers for use in a variety of industrial markets. For the oil and gas market, Kirby manufactures and remanufactures oilfield service equipment, including pressure pumping units, and manufactures electric power generation equipment, and specialized electrical distribution and control equipment for oilfield customers. CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS Fourth Quarter Year 2024 2023 2024 2023 (unaudited, $ in thousands, except per share amounts) Revenues: Marine transportation $ 466,776 $ 452,595 $ 1,913,050 $ 1,721,937 Distribution and services 335,539 346,581 1,352,826 1,369,703 Total revenues 802,315 799,176 3,265,876 3,091,640 Costs and expenses: Costs of sales and operating expenses 543,350 561,732 2,200,354 2,180,422 Selling, general and administrative 82,389 84,343 337,097 335,213 Taxes, other than on income 7,583 6,156 34,910 34,766 Depreciation and amortization 62,545 54,905 240,322 211,156 Impairments 56,303 — 56,303 — Gain on disposition of assets (1) (779) (2,207) (5,009) Total costs and expenses 752,169 706,357 2,866,779 2,756,548 Operating income 50,146 92,819 399,097 335,092 Other income 3,489 1,745 12,795 11,041 Interest expense (10,661) (13,115) (49,129) (52,008) Earnings before taxes on income 42,974 81,449 362,763 294,125 Provision for taxes on income (6) (19,487) (75,867) (71,220) Net earnings 42,968 61,962 286,896 222,905 Net (earnings) loss attributable to noncontrolling interests (151) (56) (189) 30 Net earnings attributable to Kirby $ 42,817 $ 61,906 $ 286,707 $ 222,935 Net earnings per share attributable to Kirby common stockholders: Basic $ 0.75 $ 1.05 $ 4.95 $ 3.74 Diluted $ 0.74 $ 1.04 $ 4.91 $ 3.72 Common stock outstanding (in thousands): Basic 57,410 58,970 57,947 59,531 Diluted 57,852 59,335 58,355 59,857 CONDENSED CONSOLIDATED FINANCIAL INFORMATION Fourth Quarter Year 2024 2023 2024 2023 (unaudited, $ in thousands) Adjusted EBITDA: (1) Net earnings attributable to Kirby $ 42,817 $ 61,906 $ 286,707 $ 222,935 Interest expense 10,661 13,115 49,129 52,008 Provision for taxes on income 6 19,487 75,867 71,220 Impairments 56,303 — 56,303 — Depreciation and amortization 62,545 54,905 240,322 211,156 $ 172,332 $ 149,413 $ 708,328 $ 557,319 Capital expenditures $ 96,670 $ 126,767 $ 342,660 $ 401,730 Acquisitions of businesses and marine equipment $ 12,631 $ — $ 77,863 $ 37,500 December 31, 2024 2023 (unaudited, $ in thousands) Cash and cash equivalents $ 74,444 $ 32,577 Long-term debt, including current portion $ 874,948 $ 1,016,595 Total equity $ 3,353,248 $ 3,186,677 Debt to capitalization ratio 20.7 % 24.2 % MARINE TRANSPORTATION STATEMENTS OF EARNINGS Fourth Quarter Year 2024 2023 2024 2023 (unaudited, $ in thousands) Marine transportation revenues $ 466,776 $ 452,595 $ 1,913,050 $ 1,721,937 Costs and expenses: Costs of sales and operating expenses 291,443 299,906 1,188,794 1,136,526 Selling, general and administrative 33,345 33,049 137,057 134,641 Taxes, other than on income 5,372 4,550 26,476 27,602 Depreciation and amortization 50,575 46,901 197,347 184,225 Total costs and expenses 380,735 384,406 1,549,674 1,482,994 Operating income $ 86,041 $ 68,189 $ 363,376 $ 238,943 Operating margin 18.4 % 15.1 % 19.0 % 13.9 % DISTRIBUTION AND SERVICES STATEMENTS OF EARNINGS Fourth Quarter Year 2024 2023 2024 2023 (unaudited, $ in thousands) Distribution and services revenues $ 335,539 $ 346,581 $ 1,352,826 $ 1,369,703 Costs and expenses: Costs of sales and operating expenses 249,028 261,221 1,008,008 1,040,905 Selling, general and administrative 47,452 48,840 192,439 187,424 Taxes, other than on income 2,187 1,681 8,329 7,051 Depreciation and amortization 10,098 6,186 35,448 19,842 Total costs and expenses 308,765 317,928 1,244,224 1,255,222 Operating income $ 26,774 $ 28,653 $ 108,602 $ 114,481 Operating margin 8.0 % 8.3 % 8.0 % 8.4 % OTHER COSTS AND EXPENSES Fourth Quarter Year 2024 2023 2024 2023 (unaudited, $ in thousands) General corporate expenses $ 6,367 $ 4,802 $ 18,785 $ 23,341 Impairments $ 56,303 $ — $ 56,303 $ — Gain on disposition of assets $ (1) $ (779) $ (2,207) $ (5,009) ONE-TIME ITEMS The 2024 fourth quarter and 2024 and 2023 full year GAAP results include certain one-time items. The following is a reconciliation of GAAP earnings to non-GAAP earnings, excluding the one-time items, for earnings before tax (pre-tax), net earnings attributable to Kirby (after-tax), and diluted earnings per share (per share): Fourth Quarter 2024 Full Year 2024 Pre-Tax After-Tax Per Share Pre-Tax After-Tax Per Share (unaudited, $ in millions except per share amounts) GAAP earnings $ 43.0 $ 42.8 $ 0.74 $ 362.8 $ 286.7 $ 4.91 Impairments 56.3 43.0 0.74 56.3 43.0 0.74 Louisiana tax law change — (10.9) (0.19) — (10.9) (0.19) Earnings, excluding one-time items(2) $ 99.3 $ 74.9 $ 1.29 $ 419.1 $ 318.8 $ 5.46 Fourth Quarter 2023 Full Year 2023 Pre-Tax After-Tax Per Share Pre-Tax After-Tax Per Share (unaudited, $ in millions except per share amounts) GAAP earnings $ 81.4 $ 61.9 $ 1.04 $ 294.1 $ 222.9 $ 3.72 Costs related to strategic review and shareholder engagement — — — 3.0 2.4 0.04 IRS refund interest income — — — (2.7) (2.2) (0.04) Earnings, excluding one-time items(2) $ 81.4 $ 61.9 $ 1.04 $ 294.4 $ 223.1 $ 3.72 RECONCILIATION OF FREE CASH FLOW The following is a reconciliation of GAAP net cash provided by operating activities to non-GAAP free cash flow(2): Fourth Quarter Year 2024 2023(3) 2024 2023(3) (unaudited, $ in millions) Net cash provided by operating activities $ 247.4 $ 216.0 $ 756.5 $ 540.2 Less: Capital expenditures (96.7) (126.7) (342.7) (401.7) Free cash flow(2) $ 150.7 $ 89.3 $ 413.8 $ 138.5 MARINE TRANSPORTATION PERFORMANCE MEASUREMENTS Fourth Quarter Year 2024 2023 2024 2023 Inland Performance Measurements: Ton Miles (in millions) (4) 3,220 3,340 12,989 13,571 Revenue/Ton Mile (cents/tm) (5) 11.9 11.2 12.0 10.4 Towboats operated (average) (6) 281 281 285 280 Delay Days (7) 2,681 2,873 11,583 10,863 Average cost per gallon of fuel consumed $ 2.33 $ 3.41 $ 2.66 $ 3.08 Barges (active): Inland tank barges 1,094 1,076 Coastal tank barges 28 28 Offshore dry-cargo barges 4 4 Barrel capacities (in millions): Inland tank barges 24.2 23.7 Coastal tank barges 2.9 2.9 (1) Kirby has historically evaluated its operating performance using numerous measures, one of which is Adjusted EBITDA, a non-GAAP financial measure. Kirby defines Adjusted EBITDA as net earnings attributable to Kirby before interest expense, taxes on income, depreciation and amortization, and impairment of assets. Adjusted EBITDA is presented because of its wide acceptance as a financial indicator. Adjusted EBITDA is one of the performance measures used in Kirby's incentive bonus plan. Adjusted EBITDA is also used by rating agencies in determining Kirby's credit rating and by analysts publishing research reports on Kirby, as well as by investors and investment bankers generally in valuing companies. Adjusted EBITDA is not a calculation based on generally accepted accounting principles and should not be considered as an alternative to, but should only be considered in conjunction with, Kirby's GAAP financial information. (2) Kirby uses certain non-GAAP financial measures to review performance excluding certain one-time items including: earnings before taxes on income, excluding one-time items; net earnings attributable to Kirby, excluding one-time items; and diluted earnings per share, excluding one-time items. Management believes the exclusion of certain one-time items from these financial measures enables it and investors to assess and understand operating performance, especially when comparing those results with previous and subsequent periods or forecasting performance for future periods, primarily because management views the excluded items to be outside of the company's normal operating results. Kirby also uses free cash flow, which is defined as net cash provided by operating activities less capital expenditures, to assess and forecast cash flow and to provide additional disclosures on the Company's liquidity. Free cash flow does not imply the amount of residual cash flow available for discretionary expenditures as it excludes mandatory debt service requirements and other non-discretionary expenditures. These non-GAAP financial measures are not calculations based on generally accepted accounting principles and should not be considered as an alternative to, but should only be considered in conjunction with Kirby's GAAP financial information. (3) See Kirby's 2023 10-K for amounts provided by (used in) investing and financing activities. (4) Ton miles indicate fleet productivity by measuring the distance (in miles) a loaded tank barge is moved. Example: A typical 30,000 barrel tank barge loaded with 3,300 tons of liquid cargo is moved 100 miles, thus generating 330,000 ton miles. (5) Inland marine transportation revenues divided by ton miles. Example: Fourth quarter 2024 inland marine transportation revenues of $382.8 million divided by 3,220 million inland marine transportation ton miles = 11.9 cents. (6) Towboats operated are the average number of owned and chartered towboats operated during the period. (7) Delay days measures the lost time incurred by a tow (towboat and one or more tank barges) during transit. The measure includes transit delays caused by weather, lock delays or closures, and other navigational factors.
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29-01-2025
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Should You Investigate Kirby Corporation (NYSE:KEX) At US$106?
While Kirby Corporation (NYSE:KEX) might not have the largest market cap around , it saw significant share price movement during recent months on the NYSE, rising to highs of US$131 and falling to the lows of US$104. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether Kirby's current trading price of US$106 reflective of the actual value of the mid-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let's take a look at Kirby's outlook and value based on the most recent financial data to see if there are any catalysts for a price change. See our latest analysis for Kirby Kirby appears to be expensive according to our price multiple model, which makes a comparison between the company's price-to-earnings ratio and the industry average. We've used the price-to-earnings ratio in this instance because there's not enough visibility to forecast its cash flows. The stock's ratio of 19.94x is currently well-above the industry average of 3.42x, meaning that it is trading at a more expensive price relative to its peers. But, is there another opportunity to buy low in the future? Given that Kirby's share is fairly volatile (i.e. its price movements are magnified relative to the rest of the market) this could mean the price can sink lower, giving us another chance to buy in the future. This is based on its high beta, which is a good indicator for share price volatility. Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Buying a great company with a robust outlook at a cheap price is always a good investment, so let's also take a look at the company's future expectations. With profit expected to grow by 40% over the next couple of years, the future seems bright for Kirby. It looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation. Are you a shareholder? It seems like the market has well and truly priced in KEX's positive outlook, with shares trading above industry price multiples. However, this brings up another question – is now the right time to sell? If you believe KEX should trade below its current price, selling high and buying it back up again when its price falls towards the industry PE ratio can be profitable. But before you make this decision, take a look at whether its fundamentals have changed. Are you a potential investor? If you've been keeping an eye on KEX for a while, now may not be the best time to enter into the stock. The price has surpassed its industry peers, which means it is likely that there is no more upside from mispricing. However, the positive outlook is encouraging for KEX, which means it's worth diving deeper into other factors in order to take advantage of the next price drop. So while earnings quality is important, it's equally important to consider the risks facing Kirby at this point in time. Case in point: We've spotted 1 warning sign for Kirby you should be aware of. If you are no longer interested in Kirby, you can use our free platform to see our list of over 50 other stocks with a high growth potential. Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned. Sign in to access your portfolio
