Kirby (KEX) Q2 FY26 earnings call: guidance and Q&A

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

Has the Jones Act waiver impacted Kirby's coastal or inland business, and what is the expectation for its extension from D.C. contacts?

Kirby has seen no impact on inland and only a tiny bit on coastal, being fully utilized. The industry has seen some impact from 150+ non-Jones Act moves, mostly by traders. Management opposes blanket waivers, advocating for specific ones, and hopes for a specific waiver if extended past August 16 due to Middle East conflict.

“There's been no impact at all in the inland side, just a tiny bit on the coastwise side for us, we're pretty termed up, and we don't have much exposure. Christian can chime in on that. But some of the industry participants have seen it. The waiver, there's probably been 150 non-Jones Act moves, maybe a little more. The vast majority, 85-plus percent of those have been really nothing to do with national security or homeland resilience, it's really just been traders making profits.”

asked by Jon Chappell · answered by David W. Grzebinski

What are the specific drivers behind the increased confidence towards the upper end of guidance, including Venezuelan crude, Calcasieu Lock, crack spreads, petrochem exports, and D&S trucking capacity?

Management confirmed these factors are driving confidence: Venezuelan crude imports are up over 600,000 barrels/day, Calcasieu Lock work wraps up September 18, crack spreads are near record highs, and petrochemical customers are improving. D&S sees healthy demand for behind-the-meter power, solid marine repair, and a bottoming trucking sector.

“Venezuelan crude is up over 600,000 barrels a day from lows of 200,000. Calcasieu Lock is coming into play, and Christian can give you some color on that. Crack spreads are pretty much at a record. Even our petrochemical customers are doing a little better. So we're seeing good solid demand in the inland space, in particular.”

asked by Benjamin Mohr Mok · answered by David W. Grzebinski

What are the assumptions for share buybacks and other income included in the company's guidance?

Management stated they like the stock price and will continue buybacks with free cash flow, especially in the absence of acquisitions. Q2 free cash flow was lower due to working capital build (power gen receivables, fuel rebuilds), but full-year FCF guidance remains on track. Buybacks are not explicitly included in current year guidance but impact next year's EPS.

“We like the stock price where it's at, and we're happy to continue to buy it. You've heard Raj talk before that we like using our free cash flow to buy back stock when we don't have acquisitions. We're always looking for our acquisitions, particularly in our core businesses. But in the absence of those, we're very happy to use our free cash flow.”

asked by Benjamin Mohr Mok · answered by David W. Grzebinski

What percentage of the coastal market do 80,000 to 100,000 barrel ATBs represent, is the recent pricing decline temporary, and is coastal nearing a margin peak around 20%?

Christian O'Neil clarified that 80k-100k ATBs represent about 20% of the market and are the most commodity-like. The pricing decline is temporary, due to specific trade lanes and European imports, while other vessel classes saw rate increases. David Grzebinski expects coastal margins to exceed 20% in the coming years due to tight capacity and no new builds.

“No. I think when you break down the offshore fleet, you have different sizes, different classes. You have a class of equipment that's $150,000, $180,000 and we compete against MR tankers that are $330,000. All of those rate renewals this year have increased. We called out a very small subsection here, 20% of the market-ish that is the 80s and the 100s.”

asked by Scott Group · answered by Christian O'Neil

Why the change in tone to a 5-year path to peak inland margins, given the tight supply/demand, which previously suggested a faster recovery?

David Grzebinski attributed the more conservative outlook to lessons learned from last year's unexpected pricing loss due to reduced heavy crude imports. While a faster recovery is possible, 'slow and steady' is acceptable, especially with strong free cash flow for buybacks. Geopolitical and crude market dynamics add unpredictability.

“Maybe some conservatism, but also the realization of what we saw last year, Ken. I mean we -- you saw us lose a little pricing even though we were in a supply demand kind of balance situation. So we got a little more conservative because last year was a bit of a surprise to us.”

asked by Ken Hoexter · answered by David W. Grzebinski