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Why Kinder Morgan (KMI) is Likely to Top Q3 Earnings Estimates

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Kinder Morgan, Inc. (KMI - Free Report) is set to continue its earnings beat streak for third-quarter 2021, whose results are set to be released on Oct 20.  

In the last reported quarter, the leading energy infrastructure company’s adjusted earnings per share of 23 cents beat the Zacks Consensus Estimate of 19 cents, thanks to higher contributions from Texas Intrastate and Hiland Midstream systems. Strong recovery in demand for refined products, as reflected in increased transported gasoline and jet volumes, contributed to the outperformance.

Kinder Morgan’s earnings beat the Zacks Consensus Estimate thrice and met the same once in the trailing four quarters, with the average surprise being 48.6%. This is depicted in the graph below:

Kinder Morgan, Inc. Price and EPS Surprise

Kinder Morgan, Inc. Price and EPS Surprise

Kinder Morgan, Inc. price-eps-surprise | Kinder Morgan, Inc. Quote

Let’s see how things have shaped up prior to this announcement.

Trend in Estimate Revision

The Zacks Consensus Estimate for third-quarter earnings per share of 24 cents has witnessed three upward revisions over the past seven days and no movement in the opposite direction. The estimated figure suggests a rise of 14.3% from the prior-year reported number.

The consensus estimate for third-quarter revenues of $3.21 billion indicates a 10% increase from the year-ago reported figure.

What the Quantitative Model Suggests

Our proven model predicts an earnings beat for Kinder Morgan this time around as well. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat.

Earnings ESP: Earnings ESP for the company stands at +2.78%. This is because the Most Accurate Estimate is pegged at 25 cents per share, higher than the Zacks Consensus Estimate of 24 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.  

Zacks Rank: Kinder Morgan currently carries a Zacks Rank #1.

Factors Driving the Better-Than-Expected Earnings

With the North American market witnessing a rapid energy demand recovery from last year’s historic downturn, Kinder Morgan is expected to have seen higher utilization of midstream infrastructure assets in the third quarter. The leading midstream energy firm is likely to have generated stable fee-based revenues in the quarter from its gigantic natural gas transportation network that spreads across roughly 70,000 miles.

Kinder Morgan’s $2.2-billion Permian Highway Pipeline project started full commercial operations at the beginning of 2021 and transports additional daily natural gas volumes of roughly 2.1 billion cubic feet. This is expected to have led to a year-over-year rise in natural gas transportation to the U.S. Gulf Coast, thereby resulting in higher profit levels. Also, with increased natural gas demand, the relevance of the pipeline has been significantly highlighted in the third quarter.

The Zacks Consensus Estimate for adjusted earnings before depreciation, depletion and amortization expenses, including amortization of excess cost of equity investments (EBDA) for the Natural Gas Pipelines segment, is pegged at $1,085 million for the third quarter. This signals a marginal increase from $1,082 million in the year-ago period.

Also, the consensus estimate for the Products Pipelines segment’s EBDA is pegged at $286 million, indicating an increase from $269 million in third-quarter 2020. The same for the Terminals segment is pegged at $248 million, indicating a marginal increase from $246 million a year ago on the back of higher exporting volumes.

Other Stocks to Consider

Here are some other companies from the Energy space that you may also want to consider, as our model shows that these too have the right combination of elements to post an earnings beat in the upcoming quarterly reports:

EQT Corporation (EQT - Free Report) has an Earnings ESP of +20.31% and a Zacks Rank of 2. It is scheduled to report third-quarter results on Oct 27. You can see the complete list of today’s Zacks #1 Rank stocks here.

Range Resources Corporation (RRC - Free Report) has an Earnings ESP of +1.63% and is a Zacks #1 Ranked player. The company is scheduled to release third-quarter results on Oct 26.

Continental Resources, Inc. has an Earnings ESP of +0.68% and a Zacks Rank #1. The firm is scheduled to release quarterly earnings on Nov 1.


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