Kirby: Zacks’ Bear of the Day Play

The oil services recovery hasn’t yet arrived for Kirby Corporation (KEXSnapshot Report) . And now the marine segment has seen some weakness too. Full year earnings estimates for both 2016 and 2017 are being cut on this Zacks Rank #5 (Strong Sell).

Kirby is the largest domestic tank barge operator in the United States. It transports bulk liquid through the Mississippi River System, on the Gulf Intracoastal Waterway, along all three coasts of the United States and in Alaska and Hawaii.

It transports items that have seen tough days in recent months, including petrochemicals, black oil, refined petroleum products and agricultural chemicals.

It also operates offshore dry-bulk barge and tugboat units providing dry-bulk cargoes in the United States coastal trade.

It’s second segment specializes in diesel engines, including after-market service for medium-speed and high speed diesel engines. It also services pump and manufactures and remanufactures oilfield service equipment, including pressure pumps.

Mixed Signals in the Second Quarter

On July 27, Kirby reported second quarter earnings and beat the Zacks Consensus by 2 cents.

Revenue fell to $441.6 million from $543.2 million in the year ago quarter.

In the inland marine barge segment, it saw strong utilization early in the quarter but tank barge utilization fell later in the quarter. In the coastal marine segment, some customers were still electing short-term, or spot, contracts.

On the diesel engine side, which is most impacted by the downturn in the energy industry, there were signs of hope.

In the land-based market, it saw an increased number of orders for pressure pumping unit service and remanufacturing work. A sign of better times to come?

But, there is still weak demand in the sale of engines. And it did not receive orders for new pressure pumping units in the quarter.

In the Gulf of Mexico oilfield services market, customers are still deferring any major overhaul projects.

Lowered Guidance

Utilization fell to the low-to-mid 80% range in July in the inland marine system so it is guiding its marine segments in this range.

It also expects the depressed oilfield services market in the Gulf of Mexico to continue through the remainder of the year.

Kirby lowered its full year earnings guidance to a range of $2.40 to $2.70 from its prior guidance of $2.80 to $3.20 to reflect the weakness in the inland barge market.

The analysts, of course, have also cut their estimates. 3 estimates were cut for 2016 in the last 30 days with the Zacks Consensus falling to $2.62 from $2.97.

That is an earnings decline of 37.6% from 2015 when Kirby made $4.20.

The analysts are getting nervous about 2017 as well. 3 estimates were cut for 2017 during the same time period pushing the Zacks Consensus down to $2.87.

Shares Tank But Still Aren’t Cheap

Kirby shares sold off as energy declined in 2015 but saw some recovery, when crude prices rose, in early 2016.

That was an optimistic bounce.

After the earnings report and new, lowered guidance, the shares have weakened again.

But are they cheap here?

Kirby trades with a forward P/E of 21 which is more expensive than the average of the S&P 500.

If you must be in the shipping stocks, you should consider Aegean Marine (ANWSnapshot Report) . It’s a Zacks #1 Rank (Strong Buy) and is much cheaper with a forward P/E of 8.6.

What about shorting some of these stocks?

Learn how to short on this podcast.

More Stocks to Sell. Now.

Beyond our Bear Stock of the Day, today’s list of 220 Zacks Rank #5 Strong Sells demand even more urgent attention. If any are lurking in your portfolio or Watch List, they should be removed immediately. Many appear to be sound investments but, since 1988, such stocks have actually performed more than 11X worse than the S&P 500.

See today’s Zacks “”Strong Sells”” absolutely free >>.


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