We recently compiled a list of the 8 Best Marine Shipping Stocks to Invest In.In this article, we are going to take a look at where Kirby Corporation (NYSE:KEX) stands against the other marine shipping stocks.
The Maritime Freight Transport industry plays a significant role in global trade as it handles about 90% of it. The expansion of seaborne trade is benefiting consumers worldwide by providing competitive freight rates. According to Mordor Intelligence, the industry is projected to grow from approximately $381.69 billion in 2024 to around $471.81 billion by 2029, at a compound annual growth rate (CAGR) of 4.33%.
The Evolution of Shipping in a Changing World
According to a KPMG report posted in May, the global shipping industry is on an upward trend despite challenges like vessel accessibility, labor shortages, and geopolitical instability. Around 83% of the world fleet consists of small to medium-sized ships, with small vessels making up 38% by number but only 1% by tonnage. Increasing container ship availability is expected to stabilize freight rates and restore the supply-demand balance.
Port delays and logistical bottlenecks are expected to ease, but geopolitical conflicts, especially in Ukraine and the Middle East have disrupted some important shipping routes, which have led to longer, costlier voyages. The industry faces a potential shortage of maritime officers by 2026 and women make up only 2% of the workforce.
Despite these challenges, global economic growth of 3% annually will support seaborne trade expansion. Freight rates have returned to pre-pandemic levels, as tanker demand remains strong due to a 1.9% fleet growth in 2023. Additionally, LNG demand is expected to stabilize the market, while container freight rates are recovering due to voyage restrictions and reduced vessel availability.
Trends Shaping the Industry
According to the above-mentioned KPMG report, the shipping and port industries are experiencing transformative trends that are influenced by decarbonization, digitalization, and evolving supply chains. Despite 6% of post-COVID stimulus efforts targeting greenhouse gas (GHG) emission reductions, rising fuel prices due to the Russia-Ukraine conflict pose challenges, as the maritime sector accounts for 2.8% of global GHG emissions, with over 40% of marine cargo being fossil fuels.
Digital adoption is on the rise, with the smart ports market expected to grow from $1.9 billion to $5.7 billion at a CAGR of 24.3% from 2022 to 2027. The pandemic has highlighted supply chain vulnerabilities, which has prompted the companies to diversify sourcing and rethink logistics.
Our Methodology
For this article, we used stock screeners to identify 25 marine shipping stocks with a market cap of above $50 million. We narrowed our list to 8 stocks most widely held by hedge funds, as of Q2 2024. The 8 best marine shipping stocks to invest in are listed in ascending order of their hedge fund sentiment.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
A line of dredgers and cranes at a marine transportation dock.
Kirby Corporation (NYSE:KEX) is Texas-based and operates in the U.S. marine transportation sector, particularly through its extensive operations involving tank barges. It transports a wide range of bulk liquid products, including petrochemicals, black oil, refined petroleum products, and agricultural chemicals.
According to our database, 32 hedge funds held stakes in Kirby (NYSE:KEX) in the second quarter, with positions worth $659.739 million. As of June 30, with 887,384 shares of the company, valued at $106,246 million, Encompass Capital Advisors is the largest shareholder of the company. It takes the top position on our list of the best marine shipping stocks to invest in.
The company’s service network covers critical waterways, including the Mississippi River System, the Gulf Intracoastal Waterway, and all three U.S. Coasts. Due to this, it has an advantage in a market where efficient and reliable transport of liquid commodities is essential.
The scale of Kirby’s (NYSE:KEX) operations is noteworthy. According to the company, its inland tank barge fleet alone constitutes around 27% of the U.S. market as it has 1,093 tank barges that collectively have a capacity of 24.2 million barrels, supported by 287 towboats.
Additionally, its coastal fleet, while smaller, adds further capacity with 28 tank barges and 25 tugboats, along with four offshore dry-bulk cargo barges and associated tugboats. The substantial fleet not only allows the company to meet diverse transportation needs but also enables it to capitalize on various market opportunities.
David Grzebinski, the CEO, expressed optimism about the company's recent performance, attributing strong results in the first half of the year to effective operations and favorable market conditions. The company is projecting significant net cash from operations, estimated between $600 million and $700 million for 2024. The strong cash flow is important as it provides the company with the financial flexibility to invest in its infrastructure and services.
Capital spending is expected to range from $300 million to $330 million, which includes essential investments in maintenance and improvements to both inland and coastal marine equipment. Approximately $200 million to $240 million is earmarked for these maintenance activities, which ensures that Kirby’s (NYSE:KEX) operations remain efficient and competitive.
Furthermore, the allocation of about $90 million for growth initiatives suggests that the company is not just maintaining its current capabilities but is also looking to expand and improve its services across both marine transportation segments.
Overall KEX ranks 1st among the best marine shipping stocks to invest in. While we acknowledge the potential of KEX as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is promising and trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
