Kirby Corporation (NYSE:KEX) Q2 2019 Earnings Conference Call - Final Transcript

Jul 25, 2019 • 08:30 am ET


Kirby Corporation (NYSE:KEX) Q2 2019 Earnings Conference Call - Final Transcript


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David W. Grzebinski

previously discussed, we have reduced our 2019 earnings guidance to $2.80 to $3.20 a share. This represents a $0.50 per share reduction to the midpoint of our previous guidance range. We did reaffirm our capital spending guidance of $225 million to $245 million in the press release earlier today.

Looking at our segments, in marine transportation, we expect the inland market will remain tight with our barge utilization rates in the mid-90% range. With solid customer demand, modest increases in GDP, additional petrochemical capacity scheduled to come online and new Permian crude pipelines bringing additional volumes to the Gulf Coast, we believe activity should remain strong for the balance of this year and through 2020. In the third quarter, our inland marine operations will continue to be challenged by near-term delays associated with high water conditions on the Mississippi River, as well we experienced a recent hurricane along the Gulf Coast earlier in the third quarter. However, improved efficiencies generated by better weather and increased pricing should yield modest sequential improvement in revenue and operating margin for our inland business in the third quarter.

In the coastal market, we expect utilization will remain in the low to mid-80% range for the remainder of 2019, with revenues and operating margins in the third quarter expected to be similar to the second quarter. In the fourth quarter, however, increased shipyard activity on several large vessels and the seasonal end to activity in Alaska will result in reduced revenue and operating income. Overall, in marine transportation for 2019, we now expect revenues to increase in the mid-to-high single digits year-on-year with operating margins in the low double digits to mid-teens range.

For our Distribution and Services segment, I've already largely covered the second half outlook for the oil and gas sector. In our commercial and industrial markets, we expect revenues to decline in the third quarter, primarily due to reduced large power generation system installations. Additionally as water conditions on the inland waterways improve, we expect reduced service activity in our marine repair business. It is likely that much of the available towboat horsepower will be needed in the dry cargo area to catch up from months of delays. These reductions should be partially offset by higher utilization in our power generation rental fleet during the summer storm season along the Gulf Coast.

In total, for distribution and services, we expect third quarter revenue to decline in the mid-teens percentage range compared to the second quarter, with reduced deliveries of pressure pumping and backup power generation equipment being the main drivers.

Operating margins are expected to be slightly down sequentially, with ongoing cost reductions keeping margins relatively stable. For the full year, we expect revenues to decline in the high single digits year-on-year. The revenue composition for the full year is expected to be approximately 55% oil and gas related and 45% commercial and industrial related.

Operating margins are expected to be in the lower end of the mid to high-single-digit range. Overall,