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    KEX
    Earnings call· Jun 2026(Q2 FY26)

    KIRBY Q2 FY26 earnings call KEX

    Jul 29, 2026 Source

    Executive summary

    Kirby Q2 FY26 — Strong Marine Fundamentals and Power Gen Backlog Growth Drive Solid Quarter

    Kirby delivered a solid second quarter, driven by healthy demand and improving pricing in Marine Transportation, alongside robust growth in Power Generation. The company reaffirmed its full-year EPS guidance, expecting to trend towards the upper end, supported by continued inland pricing momentum and improving engine availability for Power Gen backlog conversion. Management expressed confidence in a multi-year growth cycle for inland marine and the long-term service annuity potential from behind-the-meter power solutions.

    Highlights

    5

    • EPS of $1.67, up 11% sequentially.

    • Marine Transportation Inland operating margins in the high teens range, reflecting healthy demand and improving pricing.

    • Distribution and Services segment revenues increased 6% YoY, with operating margins improving over 300 bps sequentially.

    • Power Generation revenues increased 8% YoY, driven by demand for behind-the-meter and backup power solutions.

    • Power Generation backlog increased to $1 billion to $1.5 billion, up from $500 million to $1 billion.

    Concerns

    5

    • Marine Transportation operating income decreased $11 million or 11% YoY, primarily due to temporary impact of higher fuel costs and elevated shipyard activity in Coastal Marine.

    • Coastal Marine term contract renewals were down in the low single-digit range YoY for 80,000 to 100,000 barrel ATBs.

    • Oil and Gas revenues were down YoY, despite sequential improvement.

    • Rising fuel costs created a temporary margin headwind in Q2, expected to reverse in Q3.

    • OEM engine availability continues to influence the pace at which Power Generation demand converts to revenue.

    Guidance & targets

    9
    CategoryTargetConfidence
    Full-year earnings per share growth
    5% to 15%
    high materiality
    High
    Full-year Inland revenues growth
    mid- to high single-digit range
    medium materiality
    High
    Full-year Inland operating margin
    high teens to low 20% range
    high materiality
    Medium
    Full-year Coastal revenues growth
    mid-single-digit range
    medium materiality
    High
    Full-year Coastal operating margin
    mid- to high teens range
    medium materiality
    Medium
    Full-year Distribution and Services revenues growth
    mid-single-digit range
    medium materiality
    High
    Full-year Distribution and Services operating margin
    mid- to high single-digit range
    medium materiality
    High
    Full-year capital spending
    $220 million to $260 million
    medium materiality
    High
    Full-year cash flow from operations
    $575 million to $675 million
    high materiality
    High

    Segment performance

    7
    SegmentRevenueYoYQoQMargin
    Marine Transportation
    Operating income decreased $11 million or 11% YoY, primarily due to temporary impact of higher fuel costs and elevated shipyard activity in Coastal Marine.
    		$537 million9%8%$88 million
    Inland Marine
    Improved market conditions resulted in average spot market rates increasing sequentially and term contract renewals increasing year-over-year.
    Average barge utilization: low-90% rangeLong-term contracts (1+ year): 65% of inland revenueTime charters (long-term): 57%Contracts of affreightment (long-term): 43%Average spot market rates: low to mid-single-digit range sequentially (up)Average spot market rates: low single-digit range YoY (down)Term contracts renewed: low single-digit range YoY (up)
    		80% of Marine Transportation segment revenue9%—high teens range
    Coastal Marine
    Impacted by elevated shipyard activity as anticipated and modestly lower year-over-year term pricing due to market dynamics in the 80,000 to 100,000 barrel ATB market.
    Average barge utilization: high-90% rangeRevenue under term contracts: 93%Time charters (term contracts): 100%Term contract renewals: low single-digit range YoY (down)
    		20% of Marine Transportation segment revenue10%—low to mid-teens range
    Distribution and Services
    Operating income increased $3 million or 8% YoY. Compared to Q1 FY26, revenues increased by $39 million or 11% and operating income increased by $15 million or 63%.
    		$385 million6%11%$38 million
    Power Generation
    Continued meaningful order activity for behind-the-meter and backup power solutions, supporting backlog growth. OEM engine availability influences pace of demand conversion.
    		40% of total segment revenues8%—high single-digit range
    Commercial and Industrial
    Strong marine repair activity contributed to revenue and operating income increases.
    Operating income growth YoY: 11%
    		50% of segment revenues12%—low double-digit range
    Oil and Gas
    Activity improved sequentially during the quarter, driven by better demand for parts and services, but results remained below prior year levels.
    Operating income growth QoQ: 67%
    		10% of segment revenues—20%mid- to high single-digit range

    Operational metrics

    33
    EPS
    $1.67up 11% sequentially
    Q2 FY26

    In line with prior year quarter.

    Marine Transportation operating income decrease
    $11 million11% YoY decrease
    Q2 FY26

    Primarily reflected temporary impact of higher fuel costs and elevated shipyard activity in Coastal Marine.

    Marine Transportation revenue increase
    $44 million9% YoY increase
    Q2 FY26

    Compared to Q2 FY25.

    Marine Transportation revenue increase
    8%QoQ increase
    Q2 FY26

    Compared to Q1 FY26.

    Distribution and Services operating income increase
    $3 million8% YoY increase
    Q2 FY26

    Compared to Q2 FY25.

    Distribution and Services revenue increase
    $39 million11% QoQ increase
    Q2 FY26

    Compared to Q1 FY26.

    Distribution and Services operating income increase
    $15 million63% QoQ increase
    Q2 FY26

    Compared to Q1 FY26.

    Cash on hand
    $39 million
    Q2 FY26
    Total debt
    $1.04 billion
    Q2 FY26
    Debt to capitalization ratio
    23.1%
    Q2 FY26
    Available liquidity
    $566 million
    Q2 FY26
    Net cash provided by operating activities
    $72.2 million
    Q2 FY26

    Included elevated working capital requirements, primarily associated with stronger business activity and timing of collections, as well as higher fuel rebuilds.

    Capital expenditures
    $71.5 million
    Q2 FY26
    Fuel cost headwind (EPS impact)
    $0.05 to $0.10
    Q2 FY26

    Expected to be recovered in Q3/Q4.

    New build economics (inland)
    40% higher
    current

    Pricing needs to be 40% higher to justify new capital deployment for inland barges.

    Crack spread
    $169all-time record high
    last week

    Management's stated figure for crack spreads.

    Crack spread (analyst initial figure)
    $160
    last week

    Analyst's initial figure, corrected by management to $169.

    Jones Act cost impact
    $0.01
    current

    Estimated cost added by Jones Act, cited by management as minimal.

    Coastal vessel class (small ATBs)
    $80,000 to $100,000
    current

    Market-specific dynamics in this range led to low single-digit declines in term contract renewal rates. Represents about 20% of the coastal market.

    Coastal vessel class (medium ATBs)
    $150,000
    current

    Other vessel classes like $150,000 and $180,000 saw rate increases.

    Coastal vessel class (large ATBs)
    $180,000
    current

    Other vessel classes like $150,000 and $180,000 saw rate increases.

    Coastal vessel class (MR tankers)
    $330,000
    current

    Kirby competes against MR tankers in the coastal market.

    Power Generation growth (prior quarter)
    45%deceleration to single digits this quarter
    prior quarter

    Analyst's observation on growth deceleration, which management did not dispute but clarified drivers.

    Share repurchases
    $59.7 million
    Q2 FY26

    Reflects confidence in long-term earnings power and attractive use of free cash flow.

    Share repurchases (Q3 YTD)
    $29 million
    Q3 FY26 YTD

    Additional shares repurchased quarter-to-date in Q3.

    Inland fleet barges
    1,134
    Q2 FY26

    Expected to be slightly up in 2026.

    Inland fleet average barge age
    17-18 years
    current

    Typically can run until about age 30-35.

    Towboat average age
    decreased
    current

    Came down a lot from purchases over the last 3 to 5 years. Towboats can go 35 years.

    New barge builds (industry)
    60
    FY26

    Represents pretty much replacement capacity for Kirby and competitors retiring equipment.

    Venezuelan crude imports
    over 600,000from lows of 200,000
    current

    Contributing to improved refining activity.

    Jones Act waiver non-Jones Act moves
    150+
    current

    85%+ of these moves were not related to national security or homeland resilience, but rather traders making profits.

    Coastal market segment (80k-100k ATBs)
    20%
    current

    This segment of the market is considered the most commodity-like in coastal.

    Inland term contracts renewal percentage
    40%
    Q4

    Approximately 40% of term contracts renew in the seasonally heavy fourth quarter renewal period.

    Industry KPIs

    4
    MetricValueDetails
    Fleet1,134barges
    Balance sheet23.1%%
    Charter coverage65%%
    Market benchmarks40%%

    Orderbook & backlog

    1
    Power Generation backlog$1 billion to $1.5 billionQ2 FY26

    up from $500 million to $1 billion

    OEM engine availability continues to influence the pace at which demand converts to revenue, but growth in inbound orders is strong.

    Risks & headwinds

    6
    Temporary fuel cost headwindQ2 FY26, reversing in Q3 FY26

    $0.05 to $0.10 EPS impact in Q2 FY26

    Mitigation: Contractual recovery mechanisms take effect in Q3; company aims for neutrality on fuel costs.

    Elevated shipyard activity in Coastal MarineQ2 FY26

    Impacted Q2 FY26 operating margins in low to mid-teens range

    Mitigation: Anticipated, part of normal operations.

    Jones Act blanket waiverExtended to August 16, 2026, potential for further extension

    Minimal direct impact on Kirby, but 150+ non-Jones Act moves (85%+ not national security related); estimated $0.01/gallon cost impact of Jones Act

    Mitigation: Advocating for specific waivers only when Jones Act equipment is unavailable.

    OEM engine availability for Power GenerationOngoing

    Influences pace of demand conversion to revenue

    Mitigation: Expected to improve in H2 FY26, supporting backlog conversion.

    Geopolitical and crude market dynamicsOngoing

    Unpredictable, can throw 'curveballs'

    Mitigation: Company maintains conservative outlook despite strong fundamentals.

    Inflationary pressuresOngoing

    Labor, paint, steel, electronics remain high

    Mitigation: Pushing for price increases to offset inflation.

    What to watch in Q3 FY26

    5

    Inland Marine pricing momentum

    Q3 FY26 / Q4 FY26
    CurrentLow to mid-single-digit sequential spot rate increases, low single-digit YoY term contract increases
    TargetContinued price increases, strong Q4 renewal season

    Why it matters

    Continued pricing gains are essential for inland margin expansion and reaching past peak levels.

    With spot pricing continuing to lead term pricing, we believe the setup remains constructive as additional contracts renew through the balance of the year, particularly during the seasonally heavy fourth quarter renewal period.

    Q&A highlights

    6

    Given current market dynamics, is the path to exceeding past peak inland margins a 12-18 month return or a more prolonged, steady move higher?

    Management believes it's a prolonged, steady move higher, a 'multiyear slow march up' over a 'good long 5-year run,' as new build economics are still 40% away from justifying new capital deployment. The Q4 renewal season is expected to set up well for 2027.

    “I absolutely believe we'll get there. It's slow and steady. As you heard in our prepared remarks, we're setting up for a good fourth quarter renewal season, and that will bode well for '27. And we just see that continuing. You'll recall, we had the maintenance bubble that rolled off last year. Well, that maintenance bubble is going to start again in late '27 and '28. So I think we're set up for a multiyear slow march up. I don't know exactly when we'll hit peak margins, but it's set up for a good long run.”

    asked by Jon Chappell · answered by David W. Grzebinski

    2 min read7 chapters

    Detailed Narrative

    01

    Inland Marine Market Dynamics

    Strong refinery utilization, increased refined product and crude movements, and healthy petrochemical activity supported barge utilization in the low-90% range. Spot market rates improved sequentially, and term contract renewals increased YoY, with current spot pricing returning to levels seen a year ago. Venezuelan crude imports are now well above first half '25 levels, contributing to improved market conditions.

    02

    Coastal Marine Performance

    Customer demand remained healthy with barge utilization in the high-90% range. While overall market conditions were favorable, market-specific dynamics for 80,000 to 100,000 barrel ATBs led to low single-digit declines in term contract renewal rates. Elevated shipyard activity also impacted margins, which were in the low to mid-teens range for the quarter.

    03

    Distribution and Services Growth Drivers

    Performance was driven by sustained growth in power generation, particularly for behind-the-meter and backup power solutions for data centers, and strong marine repair activity in Commercial and Industrial. Oil and Gas showed sequential improvement, with revenues up 20% and operating income up 67% QoQ, but remained below prior year levels.

    04

    Fuel Cost Impact and Recovery

    Rising fuel costs created a temporary margin headwind in Q2, estimated at $0.05 to $0.10 per share, which is expected to reverse in Q3 as contractual recovery mechanisms take effect. The company aims for neutrality on fuel costs, with most contracts resetting within 30-90 days, ensuring reimbursement for fluctuations.

    05

    Long-term Inland Outlook

    Management believes the inland market is set for a multi-year slow march up, with new build economics still 40% away from justifying new capital deployment. The upcoming Q4 renewal season, where approximately 40% of term contracts renew, is expected to set up well for 2027, supported by tight supply and demand.

    06

    Power Generation Aftermarket Opportunity

    The significant growth in behind-the-meter power solutions is expected to create a massive service annuity in 4-5 years, as these engines will run 24/7 and require maintenance. Kirby is enhancing its operations with 'Kirby Integrated Power Systems' to provide turnkey solutions for uptime and capture this aftermarket opportunity, which is expected to exceed the original product value.

    07

    Jones Act Waiver Discussion

    Management expressed strong opposition to the blanket Jones Act waiver, noting minimal direct impact on Kirby but significant concerns for American mariners. They advocate for specific waivers only when Jones Act equipment is unavailable, highlighting that the current waiver has primarily benefited traders rather than achieving its stated goal of helping consumers, with an estimated cost impact of only $0.01 per gallon.

    AI-generated summary of the company’s earnings call. Not investment advice.