Wednesday, December 2, 2015

Seeking Alpha: Kirby Tossed By The Crude Market

Persistently weak oil prices have continued to apply pressure to Kirby's (NYSE:KEX) valuation, as the shares are down more than 10% from my last update on this leading operator of tank barges. While Kirby's direct exposure to crude oil is relatively modest, the company can't escape the downstream consequences of less demand for crude oil transportation or the worries around a broader economic slowdown in the U.S. that would impact its petrochemical business.

Over the long term, Kirby should be fine. The large number of chemical plant expansions and newbuilds already underway should support future demand for inland barges, and the eventual expansion of domestic crude production should help both the inland and coastal businesses.

The question is how long "over the long term" takes to materialize. Pricing has softened in the inland business (with contracts renewing at prices down by the low-single digits) and there are plenty of examples of businesses/industries that have seen cyclical pullbacks go longer and deeper than expected. Kirby looks undervalued relative to its historical EV/EBITDA averages, but with three straight guidance cuts, it is hard to argue that the business has stabilized or found its bottom yet.

Continue here:
Kirby Tossed By The Crude Market

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