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Kinder Morgan (KMI) Q3 Earnings Beat by a Penny, Fall Y/Y

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Kinder Morgan Inc. (KMI - Free Report) reported third-quarter 2016 earnings of 16 cents a share from continuing operations. The bottom line beat the Zacks Consensus Estimate of 15 cents but decreased from 19 cents reported a year ago.

Total revenue for the quarter declined 10.2% year over year to $3,330 million. The reported figure also came in below the Zacks Consensus Estimate of $3,370 million.  

Dividend

Kinder Morgan maintained its quarterly dividend of 12.5 cents a share (50 cents a share annualized). The dividend is payable on Nov 15, to shareholders on record as of Nov 1, 2016.

Operational Highlights

Operating expenses in the quarter were $2,448 million, down 18% from $2,986 million spent in the third quarter of 2015.   

Operating income came in at $882 million, down 22.3% from the comparable quarter a year ago. Operating margin was approximately 26.5% compared with 19.4% in the year-ago quarter.
 

KINDER MORGAN Price, Consensus and EPS Surprise

 

KINDER MORGAN Price, Consensus and EPS Surprise | KINDER MORGAN Quote

Financials

The company reported third-quarter distributable cash flow of $1,081 million compared with $1,129 million in the year-earlier quarter. The decrease is mainly attributable to a decline in its CO2 segment and lower commodity prices.

On Sep 1, 2016, Kinder Morgan closed the earlier announced agreement to partner with Southern Company through the sale of 50% interest in the Southern Natural Gas (“SNG”) pipeline system for a total cash consideration of over $1.4 billion plus Southern Company’s share of SNG’s debt. The company used the entire amount of cash proceeds to reduce its net debt. As of the end of the third quarter, $749 million was held in escrow to redeem debt and was not included in the net debt reduction during the quarter. The debt was redeemed on Oct 1, 2016, and will make way for further net debt reduction in the fourth quarter of 2016.

As of Sep 30, 2016, Kinder Morgan reported $357 million in cash and cash equivalents. The company’s long-term debt amounted to $36,708 million at the quarter end.   

Outlook

Kinder Morgan expects to pay dividends of 50 cents per share in 2016. Due to the prolonged weakness in commodity prices, the company expects EBITDA and distributable cash flow to be below the budgeted amount by 3% and 4%, respectively.

For 2016, Kinder Morgan projects capital expenditure of about $2.7 billion, down $500 million from its budget of about $3.3 billion. It will also be $1.4 billion lower than its initial guidance of about $4.2 billion.

Zacks Rank & Stocks to Consider

Currently, Kinder Morgan carries a Zacks Rank #3 (Hold). Some better-ranked players from the energy sector include Enviva Partners, LP (EVA - Free Report) , EQT Midstream Partners and W&T Offshore (WTI - Free Report) . All of these stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
 
Enviva Partners has a mixed earnings surprise history. The partnership posted positive earnings surprise in two of the last four quarters. It reported a positive earnings surprise of 20.51% in the preceding quarter.
 
In the last reported quarter, EQT Midstream Partners delivered a positive earnings surprise of 6.72%. Coming to the earnings surprise history, the company beat estimates in three of the last four quarters.
 
W&T Offshore posted a positive earnings surprise of 29.85% in the preceding quarter. It reported a positive earnings surprise in all of the four preceding quarters.

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