Higher Segmental Revenues Up Kirby (KEX) Despite Low Liquidity

Kirby Corporation KEX currently benefits from increased demand at the distribution and services segment. However, a weak balance sheet is worrisome.

Kirby Corporation reported first-quarter 2022 earnings of 29 cents per share, meeting the Zacks Consensus Estimate. In the year-ago period, KEX had incurred a loss of 6 cents per share. Total revenues of $611 million outperformed the Zacks Consensus Estimate of $583 million and also improved approximately 23% year over year.

How is Kirby Faring?

At the distribution and services segment, Kirby is seeing increased demand for products and services.  Revenues from the segment rose 20.4% year over year to $923.7 million in 2021. The segment benefited from an improved performance in the oil and gas, and commercial and industrial markets.

The oil and gas sub-group benefited from increased manufacturing deliveries of pressure pumping and frac-based power generation equipment, as well as upbeat demand for new transmissions, parts and service in distribution. During the first quarter of 2022, distribution and services segment revenues jumped 30.3% year over year to $255.2 million. Kirby expects favorable oilfield fundamentals and strong demand in commercial and industrial to boost performance of the Distribution and Services segment in 2022.

Kirby’s cash flow generating ability is strong. In 2022, management expects cash flow from operations between $420 million and $480 million. This compares with cash flow from operations of $321.6 million in 2021. Management expects free cash flow of $230 -$310 million in 2022. Free cash flow was $223.6 million in 2021.

Decline in Kirby’s cash and cash equivalents is concerning. Cash and cash equivalents at the end of the first quarter of 2022 were $32.40 million, less than $34.81 million at the end of the fourth quarter of 2021.

Zacks Rank & Other Key Picks

Kirby currently carries a Zacks Rank #2 (Buy). You can see  the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Investors interested in the broader Zacks Transportation sector can also consider some other top-ranked stocks like Norfolk Southern Corporation NSC, C.H. Robinson Worldwide, Inc. CHRW and GATX Corporation GATX.

Norfolk Southern has a trailing four-quarter surprise of 5.2%, on average, with its earnings having surpassed the Zacks Consensus Estimate in all the last four quarters.

We are impressed with Norfolk Southern's efforts to reward its shareholders through dividends and buybacks. In January 2022, NSC's board announced a 14% increase in its quarterly dividend payout to $1.24 per share. NSC currently carries a Zacks Rank #2.

The expected long-term (three-to-five years) earnings per share (EPS) growth rate for C.H. Robinson is pegged at 9%. Better freight market conditions are aiding CHRW.

In first-quarter 2022, the top line improved 41.8% owing to favorable truckload pricing for customers and handsome profits in ocean freight. CHRW currently carries a Zacks Rank of 2.

GATX has a trailing four-quarter surprise of 40.1%, on average, with its earnings having surpassed the Zacks Consensus Estimate in all the last four quarters.

The gradual improvement in the North American railcar leasing market is a boon for GATX. GATX is currently Zacks #2 Ranked.

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