Kirby Stock Surges 46% Year to Date: What's Next for Investors?

Kirby Corporation (KEX) has displayed an impressive performance, with its shares appreciating 46% year to date. This growth is impressive and has outperformed its industry. Additionally, KEX’s price performance compares favorably with that of other shipping stocks like Dorian LPG Ltd. (LPG) and Teekay Tankers Ltd. (TNK).

YTD Price Performance

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Currently trading at $114.55, the stock rebounded 58.9% from its 52-week low of $72.11 on Dec. 07, 2023. However, it still reflects a significant 12.5% discount from its 52-week high of $130.9, reached on July 17.

Given the recent rally, the question that naturally arises is whether Kirby stock can sustain its bullish price performance or should investors book profits now. Before that, let's delve deep to unearth the reasons behind this northward price movement.

Factors Working in Favor of the KEX Stock

Kirby’s bottom line has been benefiting from its consistent efforts to reward its shareholders through dividends and share buybacks. In 2022, Kirby repurchased 0.4 million shares for $22.9 million. During 2023, Kirby repurchased 1,485,159 shares for $112.8 million. Kirby repurchased 372,265 shares at an average price of $117.33 for $43.7 million in the second quarter of 2024. Such shareholder-friendly moves indicate the company’s commitment to creating value for shareholders and underline its confidence in its business.

Kirby is being well-served by the improving sentiment pertaining to the capesize market. In fact, this year, the capesize market has undergone the strongest first quarter since 2011. The current northward movement of the Baltic Dry Index is owing to the spike in capesize spot rates.

Higher free cash flow generation expectation (on the back of higher revenues and EBITDA amid some supply-chain constraints) for the full year is an added positive. For 2024, KEX now expects to generate $600-$700 million of net cash from operating activities. The guidance marks an improvement from $540.2 million of cash generated from operating activities in 2023 and $294.1 million in 2022.

Given the tailwinds surrounding the stock, earnings estimates have been northbound, as shown below.

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Impressive Valuation Picture for KEX Stock

From a valuation perspective, Kirby is trading at a discount compared with the industry, going by its forward 12-month price-to-sales ratio. The company has a Value Score of B.

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Rising Expenses Weigh on Kirby Stock

Rising expenses pose a threat to the company's bottom line. During the first half of 2024, costs and expenses rose 2.2% year over year. This was preceded by a 6.3% increase in 2023 and a 3.5% rise in 2022, primarily due to higher costs of sales and operating expenses and selling, general and administrative expenses. Supply-chain disruptions are also hurting the stock.

To Conclude

There is no doubt that the stock is attractively valued, and consistent shareholder-friendly initiatives and strong cash flow generating ability are major tailwinds for Kirby. However, investors should refrain from rushing to buy KEX now due to the headwinds that it faces.

Instead, investors should monitor the company’s developments closely for a more appropriate entry point. For those who already own the stock, it will be prudent to stay invested. The stock’s Zacks Rank #3 (Hold) supports our thesis. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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