Kirby On Track to Meet Estimates

Tuesday, October 02, 2001
Kirby Corp. reported second quarter earnings per share of $.44 versus $.39 a year ago, beating a Wall Street consensus estimate of $.40, reported Lazard Frères & Co., LLC. The marine transportation segment benefited from 94 inland barges leased from Dow Chemical Company in February, the Lazard report said. Lazard noted that the weakness in the company's core chemical and petrochemical business is expected to continue at least through the third quarter, while refined product, fertilizer and black oil volumes should continue to be strong. The company is expected to benefit from lower interest rates and a declining debt balance. As a result, Lazard has raised its 2001 EPS estimate to $1.60 from $1.53 and its 2002 EPS estimate to $1.72 from $1.69. Kirby's marine transportation second quarter revenue increased 11.6 percent to $124.9 million from $111.9 a year before, said Lazard, while operating margin declined to 17.3 percent fro 19.1 percent in 2Q 2000. The decline in margin is partially attributable to a higher portion of revenue coming from lower margin refined products and fertilizer, but can also be due to the lease of the 94 barges from Dow. The barges generated lower-than-average margins for the company because they were used exclusively for Dow's Union Carbide shipments. During the third quarter of 2001, Lazard reported, Kirby expects to fully integrate the new barges into its fleet and improve their utilization and efficiency and boost margins. Company management estimates that the barges' addition provided a benefit of about $.01-$.02 to EPS in the second quarter, and the contribution is expected to improve as the vessels are integrated into the fleet. Pricing for renewals of contracts, which represent an estimated 70 percent of business, was indicated to be up between three and five percent, while spot market pricing has leveled off from first quarter levels. Spot market prices, however, are still at healthy levels, said Lazard. Kirby's diesel repair revenue improved 24.4 percent to $22.7 million from $18.3 million in second quarter 2000, benefiting from two acquisitions completed in the fourth quarter of 2000. While the company enjoyed a solid operating environment in the Gulf of Mexico, said Lazard, the margins declined to 9.6 percent from 10.6 percent. Lazard expects margins to remain at current levels and projects modest improvement for the fourth quarter. The company's debt level declined to $264.1 million from $293.4 million at the end of 2000, as it continued to use cash from operations to pay down debt. The debt-to-total capital ratio stands at 48.2 percent, down from 52.8 percent at the end of 2000. Lazard estimates the company will generate $85.9 million in cash flow from operations in 2001 and should spend about $55-$60 million on capex. Most of the free cash flow will likely be used to pay down debt. Lazard reported that Kirby is expected to meet full-year estimates and maintained its Outperform rating on company shares with a $28 price target.
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