Marine transportation service company Kirby (NYSE:KEX) met Wall Street’s revenue expectations in Q4 CY2024, but sales were flat year on year at $802.3 million. Its GAAP profit of $0.74 per share was 43.1% below analysts’ consensus estimates.
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Kirby (KEX) Q4 CY2024 Highlights:
- Revenue: $802.3 million vs analyst estimates of $803.7 million (flat year on year, in line)
- EPS (GAAP): $0.74 vs analyst expectations of $1.30 (43.1% miss due to $56 million impairment charge)
- Adjusted EBITDA: $172.3 million vs analyst estimates of $167.7 million (21.5% margin, 2.8% beat)
- Operating Margin: 6.3%, down from 11.6% in the same quarter last year
- Free Cash Flow Margin: 18.8%, up from 11.2% in the same quarter last year
- Market Capitalization: $6.12 billion
David Grzebinski, Kirby’s Chief Executive Officer, commented, “Our fourth quarter results included some seasonal softness in both marine transportation and distribution and services, as we experienced weather and navigational challenges for marine and typical seasonal weakness in distribution and services. These headwinds were offset by good execution from our teams in both segments during the quarter that drove strong year-over-year financial performance, with adjusted earnings per share up 24% year-over-year. We ended the year on a good note, and we anticipate strong growth in 2025.
Company Overview
Transporting goods along all U.S. coasts, Kirby (NYSE:KEX) provides inland and coastal marine transportation services.
Marine Transportation
The 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 Growth
Examining a company’s long-term performance can provide clues about its quality. Any business can put up a good quarter or two, but the best consistently grow over the long haul. Regrettably, Kirby’s sales grew at a sluggish 2.8% compounded annual growth rate over the last five years. This fell short of our benchmarks, but there are still things to like about Kirby.
We at StockStory place the most emphasis on long-term growth, but within industrials, a half-decade historical view may miss cycles, industry trends, or a company capitalizing on catalysts such as a new contract win or a successful product line. Kirby’s annualized revenue growth of 8.3% over the last two years is above its five-year trend, suggesting some bright spots. We also think Kirby’s is one of the better Marine Transportation businesses as many of its peers faced declining sales because of cyclical headwinds. 
We can dig further into the company’s revenue dynamics by analyzing its most important segments, Marine Transportation and Distribution and Services, which are 58.2% and 41.8% of revenue. Over the last two years, Kirby’s Marine Transportation revenue (petroleum products and chemicals) averaged 9.1% year-on-year growth while its Distribution and Services revenue (aftermarket parts and equipment) averaged 8.4% growth.
This quarter, Kirby’s $802.3 million of revenue was flat year on year and in line with Wall Street’s estimates.
Looking ahead, sell-side analysts expect revenue to grow 6.9% over the next 12 months, similar to its two-year rate. This projection doesn't excite us and indicates its products and services will see some demand headwinds. At least the company is tracking well in other measures of financial health.
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Operating Margin
Kirby was profitable over the last five years but held back by its large cost base. Its average operating margin of 1.8% was weak for an industrials business. This result isn’t too surprising given its low gross margin as a starting point.
On the plus side, Kirby’s operating margin rose by 31.6 percentage points over the last five years.
This quarter, Kirby generated an operating profit margin of 6.3%, down 5.4 percentage points year on year, but we note that there was a large, one-time impairment charge.
Earnings Per Share
Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.
Kirby’s EPS grew at a spectacular 15.6% compounded annual growth rate over the last five years, higher than its 2.8% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.
Diving into the nuances of Kirby’s earnings can give us a better understanding of its performance. As we mentioned earlier, Kirby’s operating margin declined this quarter but expanded by 31.6 percentage points over the last five years. Its share count also shrank by 3.6%, and these factors together are positive signs for shareholders because improving profitability and share buybacks turbocharge EPS growth relative to revenue growth.
Like with revenue, we 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 55.6% was higher than its five-year trend. We love it when earnings growth accelerates, especially when it accelerates off an already high base.
In Q4, Kirby reported EPS at $0.74, down from $1.04 in the same quarter last year. This print missed analysts’ estimates, but we note that the company took a large, non-recurring impairment charge this quarter. Over the next 12 months, Wall Street expects Kirby’s full-year EPS of $4.91 to grow 36.5%.
Key Takeaways from Kirby’s Q4 Results
Revenue was in line and EBITDA beat. EPS missed significantly, but this was due to a one-time impairment charge. Overall, this was a fine quarter if we look past the impairment charge, which is non-recurring in nature. The stock remained flat at $107 immediately following the results.
Is Kirby an attractive investment opportunity at the current price? We think that the latest quarter is only one piece of the longer-term business quality puzzle. Quality, when combined with valuation, can help determine if the stock is a buy. We cover that in our actionable full research report which you can read here, it’s free.