Shares of Kirby Corporation (KEX) have had a good time on the bourses of late, improving in double-digits over the past year. The encouraging price performance resulted in KEX outperforming the transportation shipping industry in the same time frame. Moreover, KEX’s price performance compares favorably with that of other industry players like Star Bulk Carriers Corp. (SBLK) and FLEX LNG Ltd. (FLNG) in the same timeframe.
One-Year KEX Stock Price Comparison
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Given the recent rally, the question that naturally arises is whether KEX stock can sustain its bullish price performance or should investors book profits now. Before that, let's delve deep to unearth the reasons behind this northward price movement.
Factors Working in Favor of KEX Stock
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, for inland marine, KEX anticipates positive market dynamics 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 the average 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 the lowest due to a high number of planned shipyards.
Higher cash flow generation ability (based on 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), which is 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. In 2022, Kirby repurchased 0.4 million shares for $22.9 million. During 2023, Kirby repurchased 1,485,159 shares for $112.8 million. 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. Buybacks not only reduces the total outstanding share count, thereby increasing earnings per share, but also signals management's belief in the intrinsic value of the stock. Such shareholder-friendly initiatives should boost investor confidence and positively impacts the bottom line.
Impressive Valuation Picture of KEX Stock
From a valuation perspective, KEX is trading at a discount compared to the industry, going by its forward 12-month price-to-sales ratio. The company has a Value Score of B.
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Risks Weighing on Kirby Stock
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) have hurt the segmental performance.
The commercial and industrial market was weighed down by lower business levels in Thermo King and on-highway businesses due to the ongoing trucking recession. The oil and gas market was affected by lower levels of conventional oilfield activity. Given this disappointing scenario, overall segmental demand is expected to remain mixed across products and services for 2025. Segmental revenues are anticipated to be flat to slightly down, with operating margins in the high-single digits but slightly lower year over year.
Rising expenses due to higher costs of sales and operating expenses and selling, general and administrative expenses pose a threat to Kirby's bottom line. During 2024, total costs and expenses rose 3.9% year over year. This was preceded by a 6.3% increase in 2023 and a 3.5% rise in 2022. High costs naturally put pressure on margins.
Given this headwind surrounding the stock, earnings estimates have been southbound, as shown below.
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To Conclude: What Should You Do With KEX Stock?
It is understood that KEX stock is attractively valued and favorable market conditions at the marine transportation unit and consistent shareholder-friendly efforts bode well for Kirby's prospects. Kirby’s cash flow generating ability is an added positive.
Despite the positives, we advise investors not to buy KEX now as it continues to suffer from higher costs of sales and operating expenses and a rise in selling, general and administrative expenses, which pose a threat to the bottom line. KEX is also hurt by lower business levels in Thermo King and on-highway businesses and lower levels of conventional oilfield activity.
We advise investors to wait for a better entry point. For those who already own the stock, it will be prudent to stay invested. The stock’s Zacks Rank #3 (Hold) supports our thesis. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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