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Kinder Morgan (KMI) Down 3% Since Last Earnings Report: Can It Rebound?
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A month has gone by since the last earnings report for Kinder Morgan (KMI - Free Report) . Shares have lost about 3% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Kinder Morgan due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Kinder Morgan Q2 Earnings & Revenues Miss Estimates
Kinder Morganreported second-quarter 2020 adjusted earnings per share of 17 cents, missing the Zacks Consensus Estimate by a penny. The bottom line also declined from the year-ago quarter’s 22 cents.
Moreover, total revenues declined to $2,560 million from $3,214 million in the prior-year quarter and missed the Zacks Consensus Estimate of $2,907 million.
Lower contributions from the Tennessee gas pipeline and a plunge in demand for refined product primarily led to the weak quarterly results.
Segment Analysis
Natural Gas Pipelines: Adjusted earnings before depreciation, depletion and amortization expenses, including amortization of excess cost of equity investments (EBDA), in the June quarter of 2020 were down 5% to $1,016 million from $1,071 million a year ago. Lower contributions from the Tennessee gas pipeline primarily hurt the segment. Contributions also declined because of several gathering and processing assets since the production of natural gas took a hit in the quarter. The negatives were however partially countered by increased activities from projects comprising the Gulf Coast Express and Elba Liquefaction.
Products Pipelines: The segment’s adjusted EBDA in the second quarter was $227 million, reflecting a decline of 26% from $307 million a year ago. The decline in transported volumes of crude and condensate affected the performance. A plunge in demand for refined product was also responsible for the underperformance.
Terminals: Through this segment, Kinder Morgan generated quarterly adjusted EBDA of $229 million, down 21% from the year-ago period due to divestment of interests in Kinder Morgan Canada Limited last December. Lower demand for terminal assets owing to the pandemic also led to the dismal performance.
CO2: The segment’s EBDA declined 15% to $156 million from $184 million a year ago due to a drop in NGL prices and crude volumes.
Operational Highlights
Expenses related to operations and maintenance totaled $606 million, down from $646 million a year ago. However, total operating costs increased to $2,842 million in the second quarter from $2,241 million in the corresponding period of 2019.
Quarterly operating loss amounted to $282 million against year-ago quarter’s profits of $973 million.
DCF & Backlog
The company’s second-quarter distributable cash flow declined to $1,001 million from $1,128 million a year ago.
It recorded project backlog of $2.9 billion, as of the June quarter of 2020.
Balance Sheet
As of Jun 30, 2020, Kinder Morgan reported $526 million in cash and cash equivalents. The company’s long-term debt amounted to $29,976 million at quarter-end. Total debt-to-capitalization ratio at the end of the second quarter was 50.7%.
2020 Guidance
Despite the coronavirus-induced depressed commodity pricing scenario, the company continues to rely on its strong business model to raise annualized dividend payments to $1.25 per share. The midstream energy player, will however, consider the overall economic scenario while remaining committed to returning cash to stockholders and maintaining a strong balance sheet.
Kinder Morgan projects 2020 DCF to be lower by a little more than 10% from the initial guidance of $5.1 billion, thanks to dented energy demand and low commodity prices owing to the pandemic. The virus outbreak also compelled the company to anticipate a decline in adjusted EBITDA for 2020 of a little more than 8% from the initial guidance of $7.6 billion.
The company has lowered its 2020 sustaining capital and expenses by a total of $170 million. The midstream firm also cut its guidance for expansion capital spending for 2020 by roughly 30%.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates review. The consensus estimate has shifted 8.23% due to these changes.
VGM Scores
Currently, Kinder Morgan has an average Growth Score of C, a grade with the same score on the momentum front. Following the exact same course, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Kinder Morgan has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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Kinder Morgan (KMI) Down 3% Since Last Earnings Report: Can It Rebound?
A month has gone by since the last earnings report for Kinder Morgan (KMI - Free Report) . Shares have lost about 3% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Kinder Morgan due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Kinder Morgan Q2 Earnings & Revenues Miss Estimates
Kinder Morganreported second-quarter 2020 adjusted earnings per share of 17 cents, missing the Zacks Consensus Estimate by a penny. The bottom line also declined from the year-ago quarter’s 22 cents.
Moreover, total revenues declined to $2,560 million from $3,214 million in the prior-year quarter and missed the Zacks Consensus Estimate of $2,907 million.
Lower contributions from the Tennessee gas pipeline and a plunge in demand for refined product primarily led to the weak quarterly results.
Segment Analysis
Natural Gas Pipelines: Adjusted earnings before depreciation, depletion and amortization expenses, including amortization of excess cost of equity investments (EBDA), in the June quarter of 2020 were down 5% to $1,016 million from $1,071 million a year ago. Lower contributions from the Tennessee gas pipeline primarily hurt the segment. Contributions also declined because of several gathering and processing assets since the production of natural gas took a hit in the quarter. The negatives were however partially countered by increased activities from projects comprising the Gulf Coast Express and Elba Liquefaction.
Products Pipelines: The segment’s adjusted EBDA in the second quarter was $227 million, reflecting a decline of 26% from $307 million a year ago. The decline in transported volumes of crude and condensate affected the performance. A plunge in demand for refined product was also responsible for the underperformance.
Terminals: Through this segment, Kinder Morgan generated quarterly adjusted EBDA of $229 million, down 21% from the year-ago period due to divestment of interests in Kinder Morgan Canada Limited last December. Lower demand for terminal assets owing to the pandemic also led to the dismal performance.
CO2: The segment’s EBDA declined 15% to $156 million from $184 million a year ago due to a drop in NGL prices and crude volumes.
Operational Highlights
Expenses related to operations and maintenance totaled $606 million, down from $646 million a year ago. However, total operating costs increased to $2,842 million in the second quarter from $2,241 million in the corresponding period of 2019.
Quarterly operating loss amounted to $282 million against year-ago quarter’s profits of $973 million.
DCF & Backlog
The company’s second-quarter distributable cash flow declined to $1,001 million from $1,128 million a year ago.
It recorded project backlog of $2.9 billion, as of the June quarter of 2020.
Balance Sheet
As of Jun 30, 2020, Kinder Morgan reported $526 million in cash and cash equivalents. The company’s long-term debt amounted to $29,976 million at quarter-end. Total debt-to-capitalization ratio at the end of the second quarter was 50.7%.
2020 Guidance
Despite the coronavirus-induced depressed commodity pricing scenario, the company continues to rely on its strong business model to raise annualized dividend payments to $1.25 per share. The midstream energy player, will however, consider the overall economic scenario while remaining committed to returning cash to stockholders and maintaining a strong balance sheet.
Kinder Morgan projects 2020 DCF to be lower by a little more than 10% from the initial guidance of $5.1 billion, thanks to dented energy demand and low commodity prices owing to the pandemic. The virus outbreak also compelled the company to anticipate a decline in adjusted EBITDA for 2020 of a little more than 8% from the initial guidance of $7.6 billion.
The company has lowered its 2020 sustaining capital and expenses by a total of $170 million. The midstream firm also cut its guidance for expansion capital spending for 2020 by roughly 30%.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates review. The consensus estimate has shifted 8.23% due to these changes.
VGM Scores
Currently, Kinder Morgan has an average Growth Score of C, a grade with the same score on the momentum front. Following the exact same course, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Kinder Morgan has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.