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Why Is Kinder Morgan (KMI) Down 3.2% Since Last Earnings Report?

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It has been about a month since the last earnings report for Kinder Morgan (KMI - Free Report) . Shares have lost about 3.2% 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 its most recent earnings report in order to get a better handle on the important catalysts.

Kinder Morgan Beats Q4 Earnings & Revenues Estimates

Kinder Morgan reported fourth-quarter 2020 adjusted earnings per share of 27 cents, beating the Zacks Consensus Estimate of 24 cents. The bottom line also increased from the year-ago quarter’s profit of 26 cents.  The strong quarterly earnings were aided by contributions from the Texas Intrastate systems and Natural Gas Pipeline of America (NGPL). This was offset partially by lower demand for terminal assets.

Total revenues declined to $3,115 million from $3,352 million in the prior-year quarter but beat the Zacks Consensus Estimate of $3,056 million.

Segment Analysis

Natural Gas Pipelines: Adjusted earnings before depreciation, depletion and amortization expenses, including amortization of excess cost of equity investments (EBDA), in the December quarter of 2020 were down 5% to $1,189 million from $1,248 million a year ago. Lower transportation and gathering volumes affected the performance. The increase in contributions from the Texas Intrastate systems and NGPL made up for the underperformance partially.

Products Pipelines: The segment’s adjusted EBDA in the fourth quarter was $258 million, reflecting a decline of 20% from $322 million a year ago. Owing to reduced demand, volumes of refined product and crude & condensate were lower, which in turn affected the unit.

Terminals: Through this segment, Kinder Morgan generated quarterly adjusted EBDA of $258 million, down 11% from the year-ago period. Lower demand for terminal assets owing to the pandemic led to the dismal performance.

CO2: The segment’s EBDA decreased 10% to $167 million from $185 million a year ago owing to a drop in crude production and CO2 sales volumes. The decline was partially compensated by increased realized crude prices and a decrease in operating expenditures.

Operational Highlights

Expenses related to operations and maintenance totaled $606 million, down from $679 million a year ago. However, total operating costs increased to $2,135 million in the fourth quarter from $1,421 million in the corresponding period of 2019.

Quarterly operating income amounted to $980 million, down from $1,931 million a year ago.

DCF

The company’s fourth-quarter distributable cash flow (DCF) declined to $1,250 million from $1,354 million a year ago.

Balance Sheet

As of Dec 31, 2020, Kinder Morgan reported $1,184 million in cash and cash equivalents. The company’s long-term debt amounted to $30,838 million at quarter-end. Total debt-to-capitalization ratio at the end of the fourth quarter was 51.2%.

2021 Guidance

The midstream infrastructure provider expects its board of directors to hike dividend payment for 2021 by 3% to $1.08 per share (annualized). Notably, Kinder Morgan projects 2021 net income of $2.1 billion or earnings of 92 cents per share. The company also projects DCF for this year at roughly $4.4 billion. In 2021, the leading North American energy infrastructure company is planning to invest $800 million in expansion projects and contributions to joint ventures.

How Have Estimates Been Moving Since Then?

It turns out, estimates review have trended upward during the past month.

VGM Scores

Currently, Kinder Morgan has an average Growth Score of C, though it is lagging a bit on the Momentum Score front with a D. Charting a somewhat similar path, 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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