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What's in the Cards for Kinder Morgan (KMI) in Q2 Earnings?

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Midstream energy assets operator Kinder Morgan Inc. (KMI - Free Report) is expected to report second-quarter 2017 earnings on Jul 19.

Last quarter, the company had delivered a 5.56% negative earnings surprise. However, Kinder Morgan posted an average positive earnings surprise of 1.67% for the last four quarters. Let’s see how things are shaping up prior to the announcement.

Factors to Consider

Kinder Morgan has the largest network of natural gas pipelines in North America that spread over almost 70,000 miles. Most importantly, the company’s midstream properties are linked to all the prospective plays in the U.S. that are rich in natural gas.

These extensive networks of natural gas pipelines, for which the company has invested billions of dollars, provide it with stable fee-based revenues. In fact, Kinder Morgan expects 91% of its 2017 cash flow generation to come from fees charged for its midstream properties.

However, weaknesses in oil and gas prices could mar demand for midstream energy assets by upstream energy companies. During the April to June quarter of this year, oil and natural gas prices fell 8.4% and 5%, respectively. Lower commodity prices might call for reduced exploration and production activities. This could call for lower need for transportation and storage properties for carrying and storing the commodities produced.

Price Performance in Q2

During the quarter, Kinder Morgan has underperformed the Zacks categorized Oil/Gas Production Pipeline Mlp industry. Over the aforesaid period, the stock has lost 11.9% compared with the 9.6% decline of the broader industry. 

Earnings Whispers

Our proven model does not conclusively show that Kinder Morgan is likely to beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. That is not the case here as you will see below.

Zacks ESP: Earnings ESP for the company is +7.14% as the Most Accurate estimate is pegged at 15 cents, while the Zacks Consensus Estimate is at 14 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Kinder Morgan carries a Zacks Rank #4 (Sell). Please note that we caution investors against stocks with a Zacks Rank #4 or5 (Strong Sell) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks to Consider

Though an earnings beat looks uncertain for Kinder Morgan, here are some firms that you may want to consider on the basis of our model. These have the right combination of elements to post an earnings beat this quarter:

Boardwalk Pipeline Partners LP (BWP - Free Report) , with an Earnings ESP of +3.45% and a Zacks Rank #1.

TransCanada Corporation (TRP - Free Report) , with an Earnings ESP of + 7.84% and a Zacks Rank #1.

The Williams Companies Inc (WMB - Free Report) , with an Earnings ESP of + 22.22% and a Zacks Rank #2.

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