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Kinder Morgan Inc. (KMI - Analyst Report) reported fourth quarter 2013 earnings of 33 cents a share from continuing operations, failing to meet the Zacks Consensus Estimate of 36 cents. However, the quarterly earnings increased from the year-earlier profit level of 32 cents.
For full-year 2013, Kinder Morgan posted earnings of $1.15 a share from continuing operations compared with $1.08 recorded in 2012. The earnings also failed to meet the Zacks Consensus Estimate of $1.16.

Total revenue for the quarter increased 25.8% year over year to $3,872.0 million. The reported figure surpassed our expectation of $3,757.0 million. In 2013, total revenue increased to $14,070 million from $9,973 million reported in 2012 and beat the Zacks Consensus Estimate of $13,507 million.


Kinder Morgan boosted its quarterly dividend to 41 cents a share ($1.64 per share annualized), up 11% from 37 cents ($1.48 per share annualized) paid in the fourth quarter of 2012.

The company’s growth curve will be driven by its ownership of the general partnership of Kinder Morgan Energy Partners, L.P. (KMP - Analyst Report). The natural gas assets acquired by Kinder Morgan from El Paso Corporation will also augment dividend growth.

Operational Highlights

Total expenses in the quarter were $2,712.0 million, representing a 28.3% increase from $2,114.0 million spent in the fourth quarter of 2012.

Operating income came in at $1,160.0 million in the quarter, representing a 20.2% growth from the comparable quarter a year ago. Operating margin was approximately 30.0% compared with 31.3% in the year-ago quarter.


Cash available for dividend payments was $482.0 million in the fourth quarter of 2013, an increase of 10% from $439.0 million in the comparable quarter last year. For 2013, Kinder Morgan reported $1,713 million cash available to pay dividends, up 21% from $1,411 million in 2012 and ahead of the company’s published annual budget of $1,632 million.

Our Take

Kinder Morgan is one of the largest publicly traded master limited partnerships (MLPs) and generally serves as a benchmark for the pipeline MLP group. A focus on fee-based and diversified businesses has enabled the partnership to dilute its business risks. Kinder Morgan Inc., one of the largest mid-stream energy companies in the U.S., owns the partnership’s general partner interest.

However, Kinder Morgan remains vulnerable to volatile crude oil and natural gas prices, imbalance between supply and demand for its products, and rising interest rates. As such, we expect the partnership to perform in line with the broader industry and rate it Neutral on a long-term basis.

Kinder Morgan currently holds a Zacks #3 Rank (short-term Hold rating). Better-ranked energy players include Cheniere Energy Partners LP. (CQP) and Seadrill Partners LLC (SDLP - Snapshot Report). Both these stocks currently sport a Zacks Rank #1 (Strong Buy) and offer value.


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