Don't Overlook Kirby Corp.

I've written for Fools about the numerous strong investment opportunities that are available among Houston's cadre of energy producers and oil-field services companies. There are also within the city's environs a group of companies that, while not necessarily energy companies per se, operate in and around the industry, in a sense serving as indispensible glue among energy's various sectors.

One such quasi-energy company that calls Houston home is Kirby Corp. (NYSE: KEX  ) , which has adopted a number of manifestations during its more than nine decades of existence. Its roots run deep enough in Houston that one of the city's main roads, Kirby Drive, is named for John Henry Kirby, the corporation's founder.

Transition to a pair of solid niches
Today, Kirby, which through the years has conducted oil and gas exploration and production activities, and even operated an insurance unit, has cast its lot in two strong niches. It's best known as easily the largest operator of tank barges in the U.S., transporting bulk liquid products inland throughout the Mississippi River system and the Gulf Intracoastal Waterway. Offshore, the company has expanded relatively recently to conduct operations along all three United States coasts and in Alaska and Hawaii. It also transports dry-bulk commodities along the Gulf of Mexico coast.

Its other niche involves Kirby Engine Systems. The rapidly expanding subsidiary overhauls the vital diesel engines that are manufactured by the likes of Caterpillar (NYSE: CAT  ) and others, and are vital to a host of marine, power generation, and railroad operations.

Up and down the river
By far the major unit involves the transportation of bulk liquids in the U.S. Kirby's equipment complement includes more than 800 inland tank barges, about 235 inland towboats, 59 coastal tank barges, 65 coastal tugboats, and four each of offshore dry-cargo barges and offshore tugboats. The products hauled by its marine transportation unit for the likes of Dow Chemical (NYSE: DOW  ) include petrochemicals, refined products, black oil products, and pressurized products, such as propane, butane, and butadiene.

More recently, the company has begun transporting crude oil produced by operators in the fertile Bakken play of North Dakota and Montana to refineries in Louisiana. Those units are operated by Phillips 66 (NYSE: PSX  ) , among others. Conveniently, the barges, which take about a week to transport the crude down the Mississippi River to the refineries, are then able to carry refined products, such as gasoline and diesel fuel, north on the return trip.

Bulk-liquids transportation by barge is far more than just a convenience. Indeed, from an economic perspective, it's also 40% more fuel efficient than rail and about 272% more efficient than trucking.

Diesel at your service
For a number of years, Kirby's diesel engine services business has been something of a figurative stepchild to the bigger transportation unit, which is responsible for about two-thirds of the company's revenue. Now, however, in addition to playing its traditionally vital role in servicing the units that power offshore oil-field services operations -- especially in the Gulf of Mexico -- the company has become a significant force in the expansion of the nation's unconventional oil and gas boom.

You see, the hydraulic fracturing that unlocks oil and gas trapped in solid rock thousands of feet below the Earth's surface is also beholden to diesel engines for its power. Fortunately for Kirby, fracking is sufficiently demanding of the equipment that it necessitates frequent maintenance and overhauls of the diesel power units. As such, Kirby numbers among its rapidly growing customer list fracking and pressure pumping companies from Halliburton (NYSE: HAL  ) on down.

Kirby's inland transport business has been affected by the severe drought that has gripped the central part of the nation during the past several months. In part as a result -- along with the pullback in natural gas drilling, which has been affected by the fuel's prices being in the doldrums -- the company's shares have slipped more than 25% since January, when they touched $70. While obviously an undesirable way to break a drought, the movement of Hurricane Isaac -- now a tropical storm -- will almost certainly raise the Mississippi River and its tributaries considerably in the days and weeks ahead.

The Foolish bottom line
Kirby's recent price action, along with a number of other factors, including its solid management team and its dominant position within its two areas of operation, cause me to be partial to its shares. In days of yore, I followed the company as a Wall Street analyst. Today, it's worth noting that of the 15 analysts who follow the company, all but one rate it either a "buy" or a "strong buy."

Yes, a number of analysts like Kirby, but if you are looking for a company with a strong international presence, than look no further than Caterpillar. The Motley Fool has a premium report describing in great detail the strengths and weaknesses of Caterpillar. You can access this report titled "Can Caterpillar Build Your Portfolio?" by clicking here.

Fool contributor David Lee Smith doesn't own shares in any of the companies mentioned above. Motley Fool newsletter services have recommended buying shares of Halliburton. The Motley Fool has a disclosure policy.

We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days


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