Summary
- I think Kirby Corporation's business is interesting in that it, like the railroads, is a linchpin of the U.S. economy.
- The problem is that the shares are quite expensive, the company has taken on massive amounts of debt, and shareholders have been diluted.
- I think investors would do well to avoid this stock until it drops another 40% or so.
Over the past year, the shares of Kirby Corp. (KEX) have dropped ~8.25% and that has put the company on my radar. In my view, this company proves that just because something has come down in price recently, does not make it a good investment. I think investors would be wise to avoid the shares at these levels. I'll go through my reasoning below by looking at the financial history here and by looking at the stock itself as a thing distinct from the business.
About the Company
Kirby is the largest domestic tank barge operator in the United States. The company operates a fleet of 1,066 inland barges with a capacity of 23.633 million barrels of capacity and a fleet of 278 inland towboats. These operate throughout the Mississippi River system, as well as the Gulf Coast, Alaska, and Hawaii. The coastal fleet consists of 53 tank barges with 5.1 million barrels of capacity and 50 coastal tugboats.
Throughout the extensive distribution network, the company also provides aftermarket services and parts for engines, transmissions, reduction gears, and related equipment used in the oilfield services, marine, mining, power generation, on-highway, and other industrial applications.
The company's revenue is divided roughly evenly between Marine Transportation and Distribution and Services. Marine Transportation services' revenue is largely driven by the major petrochemical and refining companies that operate in the United States. The acquisitions of Higman Inland Tank Barges (Feb 2018) and Targa Pressure Barges (May 2018) drove revenue for this group higher in 2018, in spite of poor weather. In March of this year, the company acquired Cenac Marine Services, which consists of 63 inland barges with approximately 1.833 million barrels of capacity.
The Distribution & Services Group revenue is a combination of service and parts (~70% of group revenue) and manufacturing (30%). Revenue for this group in 2018 increased ~67%, and this increase is primarily attributable to the S&S acquisition that was completed in September of 2017.
Demand for tank barge transportation services is driven by the production volumes of the bulk liquid commodities transported by barge. The four commodities typically transported by barge (petrochemicals, black oil, refined petroleum, and agricultural chemicals) each have their own demand drivers, and the company has the flexibility to move from one to another relatively seamlessly.
