Yahoo Finance

Kirby Corporation (KEX) benefits from favorable market conditions at the marine transportation unit and consistent efforts to reward shareholders through share buybacks. However, rising expenses pose a threat to the company's bottom line.

Factors Favoring KEX

Kirby has been witnessing favorable market conditions, such as higher pricing and barge utilization and improved term and spot pricing, in both the inland and coastal markets of its marine transportation segment. Notably, revenues for 2024 increased 11% year over year, and operating income improved 52% year over year. Given this encouraging backdrop, KEX anticipates positive market dynamics for inland marine due to limited new barge construction for 2025. Barge utilization rates are expected 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. Overall, inland revenues are expected to grow in the mid to high single-digit range for 2025. KEX anticipates operating margins will gradually improve during the year, with the first quarter being the lowest and an average of 200-300 bps higher for the full year.

For coastal marine, revenues for 2025 are anticipated to increase in the high-single to low-double digit range on a year-over-year basis, driven by higher pricing on contracts. Coastal operating margins are anticipated to be in the mid-teens range on a full-year basis, with the first quarter being the lowest due to a high number of planned shipyards.

Higher cash flow generation ability (on the back of higher revenues and EBITDA amid some supply chain constraints) is an added positive. In 2024, Kirby generated $756.4 million of cash from operating activities (due to higher business activity levels), higher than the $540.2 million generated in 2023 and $294.1 million in 2022. For 2025, net cash flow provided by operating activities is anticipated in the $620-$720 million band.

Kirby has been consistently rewarding its shareholders through share buybacks. During 2024, KEX purchased 1.6 million shares for $174.6 million. From the beginning of 2025 till Feb. 17, 2025, KEX purchased an additional 0.2 million shares for $26.0 million at an average price of $107.56 per share. As of Feb. 17, 2025, Kirby had almost 2.6 million shares available under its existing purchase authorizations. Such shareholder-friendly initiatives should boost investor confidence and positively impact the bottom line.

KEX: Key Risks to Watch

Kirby’s Distribution and Services segment has not been performing well. In 2024, revenues in the segment decreased 1% year over year, and operating income decreased 5% year over year. Weakness across the commercial and industrial markets (which contributed 46% of the distribution and services revenues) and oil and gas market (which account for 18-20% of segment revenues) has hurt the segmental performance.