Seaport Global Securities Upgrades Kirby On Solid Barge Industry Fundamentals

Kirby Corporation KEX is facing strong industry fundamentals and is well positioned to leverage them, according to Seaport Global Securities.

The Analyst

Seaport Global’s Kevin Sterling upgraded Kirby from Neutral to Buy, while establishing a price target of $100.

The Thesis

The inland and coastal barge markets are poised for a strong recovery due to favorable supply and demand dynamics, Sterling said in the note.

While the inland markets had improved slightly in 2019 in terms of utilization and pricing, the coastal market had delivered solid growth, the analyst mentioned. He added that channel checks indicated 15%-20% year-on-year growth in coastal contract renewal rates.

Demand fundamentals in Kirby's core markets for petrochemical and refined products were solid, Sterling said. He added that all these factors taken together positions Kirby for a pricing recovery in 2020 and beyond, especially in view of the Gulf Coast petrochemical build-out being well underway.

The inland barge markets were in recession over the past two years and the company acquired competitors at distressed prices. “Now Kirby is locked and loaded at just the right time as the cycle turns with scale like we have never seen before for either KEX or the barge industry for that matter,” Sterling wrote.

Price Action

Shares of Kirby were trading up by 5.24% at $86.80 on Thursday.