(By Mani) Kirby Corp.
) shares fell 7 percent in the past one month and is expected to remain weak as near-term concerns about guidance for the balance of the year outweigh longer term positives.
Kirby is the premier tank barge operator in the United States. The company transports petrochemicals, pressurized products, black oil products, refined petroleum products and agricultural chemical products by tank barge. Kirby also owns and operates four ocean-going barge and tug units transporting dry-bulk commodities in United States coastwise trade.
Through its diesel engine services segment, Kirby is the leading aftermarket service provider for medium-speed and high-speed diesel engines, reduction gears and ancillary products for marine and power generation applications. Kirby also makes oilfield service equipment, including hydraulic fracturing equipment, for the land-based pressure pumping and oilfield services markets.
For the first quarter ended March 31, 2012, the company earned $50.9 million, or 91 cents per share, compared with $32.4 million, or 60 cents per share, for the 2011 first quarter. Consolidated revenues for the quarter surged to $566.9 million from with $299.4 million a year-ago
However, the company recently announced that it expects earnings to be at the low-end of its guidance of $3.85-$4.05 for 2012 as maintenance expenses in its Kirby Offshore Marine (KOM) division (formerly K-Sea) will be higher than originally thought.
This combined with the dislocation in the fracing markets have created a couple of near-term overhangs for the stock.
"As such, we believe that sentiment in the name is broken and that the stock doesn't work until these issues are rectified, "RBC Capital Markets analyst John Barnes wrote in a note to clients.
However, the outlook for the inland barge business is very solid and that the current valuation levels suggest the selloff is largely over. Kirby's inland tank barge business enjoys some of the best operating fundamentals in the industry.
Capacity is very tight and while new equipment is coming on-line, suggesting that the longer-term favorable supply/demand dynamic will remain intact.
"We believe that this sets KEX up for a sustained period of rate increases, which should help margins in the division,"Barnes added.