Plenty has been written about the significant increases in crude oil production in the U.S. brought about by exploiting unconventional shales like Eagle Ford, Niobrara, and Bakken. Likewise, there has been ample attention given to the increasing production of petrochemicals in the U.S. by virtue of improved access to oil, natural gas, and natural gas liquids.
Kirby (NYSE:KEX) is a lesser-known beneficiary of these trends. The company is easily the largest operator in both the inland barge and coastal barge markets, with more than 23 million barrels of capacity in its fleet. As volumes increase and pipeline capacity becomes more of an issue, Kirby has a rare opportunity to benefit from strong utilization and pricing. Valuation on these shares does appear pretty heady, but is likely sustainable so long as petrochemical demand remains solid.
Keep On Keeping On
When Kirby reported earnings about a month ago, it was largely a continuation of the positive trends that have been underway for some time now. Revenue rose 11%, with marine revenue rising 14% (to about three-quarters of the total). Weather did impair growth in the inland business and overall ton-miles, but pricing remains good (up 6% on a revenue/ton-mile basis) and capacity utilization is strong at 90-95% of the inland fleet and 90% of the coastal fleet. This growth remains profitable growth, as the company saw a 20% increase in operating income from its marine operations.
The company's diesel engine business remains stuck in a lower gear. Revenue was up 2% from the year-ago period, but up 16% on a sequential basis. Operating income was down 4%, but that was still better than the Street had anticipated.
Turning To Newbuilds
Kirby has been a very active acquirer in both the inland and coastal markets over the years, but the company is now looking
