Kirby Corporation (KEX) and Rand Logistics (RLOG) are reaping the benefits of strong demand and tight capacity in the maritime transportation business, and these companies face further demand for their services from company-specific end markets, says Kevin W. Sterling, Senior Vice President & Senior Equity Research Analyst BB&T Capital Markets.
“Kirby is the largest chemical tank barge operator, and with low natural gas prices, that’s leading to an increase in North American chemical production. Therefore, Kirby is benefiting from the increase in chemical production as their customers ship more,” Sterling said, adding that KEX enjoys pricing leverage from this current supply/demand balance.
He also says that, “Rand Logistics [is] Great Lakes shipper, and they have a dominant market position shipping commodities on the Great Lakes. Similar to Kirby, Rand is benefiting from a situation of good demand and tight capacity.”
He adds that maritime transportation currently enjoys a more favorable environment than airfreight, with stagnant volumes and declining profit margins.
“If you look at freight forwarders, such as Expeditors International (EXPD) or UTi Worldwide (UTIW), airfreight volumes have been relatively stagnant and recent new product tech launches are driving up airfreight rates, and as a result, the forwarders are facing a margin squeeze,” Sterling said.
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