Why Kirby Corp. Rallied Today
Key Points
Kirby reported earnings above analyst expectations on Wednesday.
While its core tank barge transportation segment was flat, the company's industrial equipment business rose double-digits.
Within that high-growth equipment segment, power generation surged 56% on AI data center-related growth.
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Shares of Kirby Corp. (NYSE: KEX) rallied 15.6% on Wednesday as of 1 p.m. ET.
Kirby Corporation has an interesting mix of industrial businesses. Its traditional business is in tank barges that transport petroleum products and chemicals primarily along the Gulf Coast and Mississippi River system, but also on both U.S. coasts, Hawaii, and Alaska.
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But the company also has another business distributing and servicing engines, transmissions, and other power equipment, with a fast-growing segment that sells specialized power generation equipment and transmission equipment, and is benefiting from artificial intelligence (AI) data center-related hypergrowth.
That AI-fueled growth helped propel overall company results in the third quarter, which were reported this morning.
Kirby beats estimates on data center strength
In the third quarter, Kirby's revenue grew 4.8% to $871.2 million, with earnings per share rising 6.5% to $1.65 per share. Both figures beat analyst expectations.
Kirby's core tank barge business was relatively stable but a little soft, with marine transportation revenue down slightly as inland barge pricing softened, while coastal barge pricing remained strong. However, Kirby's distribution and services segment was the star, with revenue up 11.9% on the back of 56% growth in the power generation market. Management also said there was a record backlog of power generation equipment demand, which should pave the way for more growth ahead in that segment.
Kirby was also aggressive with share repurchases in the quarter, buying back 1.31 million shares for $120 million, with management noting another $36 million of repurchases already to start the fourth quarter.
Image source: Getty Images.
Kirby's business mix and value are interesting
Even after today's surge, Kirby only trades at just 16.4 times this year's earnings estimates. And while the vast majority of its business is in a fairly unexciting and cyclical transportation business, about 20% of its business is in the high-growth power generation segment benefiting from AI-fueled growth.
As such, some of these power-related industrial companies like Kirby could be compelling AI plays for value investors, given their generally lower valuations relative to other tech names that have largely run to fairly expensive levels.
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Billy Duberstein and/or his clients have no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
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