Stock Story -
Marine transportation service company Kirby (NYSE:KEX) reported results in line with analysts' expectations in Q2 CY2024, with revenue up 6.1% year on year to $824.4 million. It made a GAAP profit of $1.43 per share, improving from its profit of $0.95 per share in the same quarter last year.
Is now the time to buy Kirby? Find out by reading the original article on StockStory, it's free.
Kirby (KEX) Q2 CY2024 Highlights:
- Revenue: $824.4 million vs analyst estimates of $822.4 million (small beat)
- EPS: $1.43 vs analyst estimates of $1.33 (7.5% beat)
- Gross Margin (GAAP): 32.8%, up from 29.7% in the same quarter last year
- Free Cash Flow of $90,700, down 99.8% from the previous quarter
- Market Capitalization: $7.16 billion
Transporting goods along all three U.S. coasts, Kirby (NYSE:KEX) provides inland and coastal marine transportation services.
Marine TransportationThe growth of e-commerce and global trade continues to drive demand for shipping services, presenting opportunities for marine transportation companies. While ocean freight is more fuel efficient and therefore cheaper than its air and ground counterparts, it results in slower delivery times, presenting a trade off. To improve transit speeds, the industry continues to invest in digitization to optimize fleets and routes. However, marine transportation companies are still at the whim of economic cycles. Consumer spending, for example, can greatly impact the demand for these companies’ offerings while fuel costs can influence profit margins. Geopolitical tensions can also affect access to trade routes, and if certain countries are banned from using passageways like the Panama Canal, costs can spiral out of control.
Sales GrowthA company’s long-term performance can give signals about its business quality. Even a bad business can shine for one or two quarters, but a top-tier one tends to grow for years. Over the last five years, Kirby grew its sales at a weak 1.7% compounded annual growth rate. This shows it failed to expand in any major way and is a rough starting point for our analysis.
Long-term growth is the most important, but within industrials, a half-decade historical view may miss new industry trends or demand cycles. Kirby's annualized revenue growth of 13.1% over the last two years is above its five-year trend, suggesting its demand recently accelerated.
Kirby also breaks out the revenue for its most important segments, Marine Transportation and Distribution and Services, which are 58.8% and 41.2% of revenue. Over the last two years, Kirby's Marine Transportation revenue (petroleum products and chemicals) averaged 13.1% year-on-year growth while its Distribution and Services revenue (aftermarket parts and equipment) averaged 14.4% growth.
This quarter, Kirby grew its revenue by 6.1% year on year, and its $824.4 million of revenue was in line with Wall Street's estimates. Looking ahead, Wall Street expects sales to grow 6.8% over the next 12 months.
Operating MarginKirby was profitable over the last five years but held back by its large expense base. It demonstrated inadequate profitability for an industrials business, producing an average operating margin of 1.2%. This result isn't too surprising given its low gross margin as a starting point.
On the bright side, Kirby's annual operating margin rose by 28 percentage points over the last five years
This quarter, Kirby generated an operating profit margin of 14.6%, up 3.4 percentage points year on year. This increase was encouraging, and since the company's operating margin rose more than its gross margin, we can infer it was recently more efficient with expenses such as sales, marketing, R&D, and administrative overhead.
EPSWe track the long-term growth in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company's growth was profitable.
Kirby's EPS grew at an astounding 21% compounded annual growth rate over the last five years, higher than its 1.7% annualized revenue growth. This tells us the company became more profitable as it expanded.
We can take a deeper look into Kirby's earnings quality to better understand the drivers of its performance. As we mentioned earlier, Kirby's operating margin expanded by 28 percentage points over the last five years. On top of that, its share count shrank by 2.2%. These are positive signs for shareholders because improving profitability and share buybacks turbocharge EPS growth relative to revenue growth.
Like with revenue, we also analyze EPS over a shorter period to see if we are missing a change in the business. For Kirby, its two-year annual EPS growth of 83.3% was higher than its five-year trend. We love it when earnings growth accelerates, especially when it accelerates off an already high base.
In Q2, Kirby reported EPS at $1.43, up from $0.95 in the same quarter last year. This print beat analysts' estimates by 7.5%. Over the next 12 months, Wall Street expects Kirby to grow its earnings. Analysts are projecting its EPS of $4.72 in the last year to climb by 25.8% to $5.94.
Key Takeaways from Kirby's Q2 ResultsIt was good to see Kirby beat analysts' EPS expectations this quarter. We were also happy its Distribution and Services revenue topped Wall Street's estimates. Overall, this quarter seemed fairly positive and shareholders should feel optimistic. The stock traded up 1.7% to $125 immediately following the results.
