Kirby Corporation (NYSE:KEX) expects the growth in oil production at Eagle Ford’s shale reserves from the U.S. Gulf Coast will bring high demand for crude oil shipments for refining. The oil production at Eagle Ford rose to 536,000 barrels per day in first four months of 2013. This was up 39% from 385,000 barrels per day, reported in 2012. Due to limited refining capacity in the nearest refinery in south Texas, this growth in production will result in the shipping of crude oil to other refiners in the gulf coast. Thanks to company’s operation in the Gulf Coast, it expects to benefit from this growth in oil production.
Despite adding 200 barges last year, the company is operating at capacity utilization of 90%, reported in the first quarter of 2013. Thus, looking at the growth demand expected in both businesses, the overall marine revenue is expected to increase from $1.408 billion in 2012 to $1.738 billion in 2013. These all initiatives will boost the company’s EPS, which is expected to grow from $3.72 in 2012 to $4.25 in 2013.
Good return expected for investors
During the first quarter of 2013 Navios Maritime Partners L.P. (NYSE:NMM) announced that it will acquire four vessels built in Japan for $108 million. Delivery of three out of the four vessels will occur in 2013 and the last in 2014. The company earns its revenue from transportation services and chartering its vessels. Companies hire chartered ships for a particular period of time, for chartering fees, or freight rate. It charters these ships in two markets. The first is a spot market, which involves paying one-time fees for shipping goods from one destination to another. The second is a time charter market, where ships are rented for a particular time period. The new vessels will operate in the spot market, thus it will increase the company’s overall exposure in the spot market from 50% currently to 70% in 2014. The company will also benefit from the expected growth in rates in 2014.
Despite benefiting from the spot market, the overall outlook for revenue from the time charter market remains negative. With 10 out of 25 contracts, expected to get renewed at lower contract prices in 2013, it is expected that EPS of company will fall from $1.32 in 2012 to $0.81 in 2013.
The company has maintained its reputation of giving good returns to its shareholders. According to Dividend Channel, Navios Maritime Partners L.P. (NYSE:NMM) ranks among the top 25 dividend paying companies. The company announced second quarter cash distribution of $0.4445 per share. This announcement was in line with the annual dividend of $1.77 per share, which company paid last year. With a cash reserve of $62 million in the second quarter of 2013, the company expects to maintain its annual dividend yield of 11.8% this year.
Conclusion
Overall, all three companies are focusing on increasing capacity by purchasing more assets. With demand outlook expected to improve by 2014, this added capacity will definitely add value to their revenue.
Seacor is focusing more on its core business and its growth, while Kirby Corporation (NYSE:KEX) is expecting growth in revenue in its marine segment. Navios Maritime Partners L.P. (NYSE:NMM)’s acquisition of four vessels will bring good revenue in term of charter rates.
Looking at the expected EPS growth of all three companies, Seacor can post biggest EPS growth of 32.5% year-over-year in 2013 in comparison to others. Entry into the LPG shipment sector, and its core businesses growth is making huge revenue growth potential in future. Kirby Corporation (NYSE:KEX) is expected to post EPS growth of 14.25% year-over-year in 2013. Lastly, despite growth in spot market, Navios Maritime Partners L.P. (NYSE:NMM) is expected to report negative EPS growth of 38.6% due to lower contract rates in 2013.
Madhukar Dubey has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Madhukar is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
The article Shipping Companies: All Aboard or Jump Ship originally appeared on Fool.com is written by Madhukar Dubey.
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