Kirby Corporation net income beats analyst expectations despite severe winter weather

Tank barge operator saw huge jump in delay days due to winter weather and one-off events that swept through U.S. waterways.

Kirby Corporation (NYSE: KEX) reported first quarter net income that beat expectations, as the company’s onshore business offset a tough winter operating on U.S. inland and coastal waterways.

The largest U.S. owner of tank barges for liquid bulk materials, Kirby reported net earnings of $44.3 million for the quarter, or $0.74 per share, up 36 percent from a year earlier and better than the consensus forecast of $0.69 per share.

Revenue of $744.6 million was up only slightly from a year ago.

Chief Executive Officer Dave Grzebinski said the results took a hit from “temporary weakness in marine transportation, which resulted from record delay days.”

But its distribution and services business, which sells and repairs major mechanical equipment such as diesel engines and pumps, “performed well, helping to offset the results from our marine businesses,” he added.

The U.S. winter proved exceptionally difficult for riverine businesses. Kirby noted near record high water levels on the Mississippi, extended periods of ice on the Illinois River and fog along the Gulf Coast.

In addition, the Houston Ship Channel, a major artery for oil transportation, was closed for a period due to a fire, resulting in major navigation delays.

All in, Kirby saw 4,613 delay days during the quarter, an 82 percent increase from a year ago.

The delays lowered net earnings nearly $3 million, or $0.05 per share, Kirby said.

“In inland marine transportation, our quarter’s results were heavily impacted by unusually poor operating conditions throughout the U.S. waterway network,” Grzebinksi said. “Although we anticipated weather-related delays in the first quarter, this year we experienced significantly more than expected.”

Marine transport revenue was up 8 percent compared with a year earlier to $368 million. Operating income for the first quarter of 2019 doubled to $35.4 million from $16.2 million a year earlier.

Inland barges, the biggest of the marine segment, saw strong utilization in the mid-90 percent range during the quarter, thanks to increasing petrochemical demand.

Revenues for inland barges were up 12 percent, because of stronger pricing and acquisitions of other barge business. Kirby said pricing on long-term contracts rose “mid-single” digits, while spot rates were up 20 percent

Coastal barge utilization was in the low 80 percent range for the quarter. Spot prices were up 10 percent to 15 percent, while contract repriced at 5 percent gains. The higher prices and cost cuts helped reduce losses in the coastal segment.

Distribution and services revenues for the first quarter of 2019 were down 7 percent to $376.5 million. But operating income of $37.6 million was up slightly from a year earlier.

Kirby saw better demand in the commercial and industrial segment for diesel engines and service in the marine business. The power generation market was also better due to demand for back-up power systems.

But the company’s oil and gas segment saw revenue and operating income decline from 2018 due to lower demand for new and overhauled transmissions, parts and service. Likewise, the manufacturing business reported lower year-over-year revenue and operating income as a result of lower new pressure pumping unit and equipment deliveries.

Kirby stuck to its full-year earnings guidance of $3.25 to $3.75 per share. For inland barge markets, petrochemical demand is expected to remain strong.

Mississippi River and Houston Ship Channel delays are expected to ease with better weather. Along with higher pricing, inland revenue is expected to increase in the second quarter.