It has been about a month since the last earnings report for Kinder Morgan, Inc. (KMI. Shares have added about 1.4% in that time frame.
Will the recent positive trend continue leading up to its next earnings release, or is KMI due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
First-Quarter 2018 Results
Kinder Morgan reported first-quarter 2018 earnings of 22 cents per share from continuing operations. The bottom line beat the Zacks Consensus Estimate of 21 cents and increased more than 29% from 17 cents in the year-ago quarter.
Increased contribution from the liquid terminals and the Texas Interstate System contributed to the improvement.
Total revenues dropped by 0.2% year over year to $3,418 million. Moreover, the top line missed the Zacks Consensus Estimate of $3,482 million. The downside can be attributed to higher expenses and lower contributions from the CO2, Terminals and Products Pipelines segment.
Kinder Morgan raised quarterly dividend to 20 cents per share (80 cents per share annualized) from 12.5 cents in the preceding quarter. This represents an increase of 60% and is in line with the company’s plans announced in 2017. The dividend is payable on May 15, to shareholders on record as of Apr 30.
Natural Gas Pipelines: Operating income from this segment was $1,136 million, up 8% from $1,055 million in the year-ago quarter. Higher contribution from the Texas Interstate System and favorable outcome from El Paso Natural Gas (EPNG) as well as Florida Gas Transmission Pipeline led to the improvement. The growth came from various midstream gathering and processing assets, including Hiland, due to higher drilling activity.
CO2: The segment reported earnings of $199 million, which fell 19% from $218 million in first-quarter 2017. Lower commodity prices were responsible for the downside.
Terminals: This business unit reported profit of $295 million, which declined 4% from $307 million in the January-March quarter of 2017, mainly due to divestitures and lower contributions from existing Jones Act tankers due to lowered charter rates.
Products Pipelines: This segment recorded earnings of $259 million, down 10% year over year.
Kinder Morgan Canada: The segment reported earnings of $46 million, which increased 7% from $43 million in first-quarter 2017. Higher capitalized equity financing costs related to the Trans Mountain Expansion Project boosted growth.
Total expenses in the quarter were $2,469 million, up 1% from $2,447 million spent in the first quarter of 2017.
Operating income was $949 million, down from an operating profit of $977 million in the year-ago quarter.
First-quarter net income of $542 million increased from $445 million in the comparable quarter in 2017.
The company reported first-quarter distributable cash flow of $1,247 million compared with $1,215 million in the year-earlier quarter.
As of Mar 31, 2018, Kinder Morgan had cash and cash equivalents of $294 million. The company’s long-term debt amounted to $34,723 million at the end of the quarter. Total debt-to-capitalization ratio at the end of first-quarter 2018 was 49.7%.
Kinder Morgan increased its dividend by 60% to 80 cents for 2018 from 50 cents in 2017. It expects EBITDA and distributable cash flow of about $7.5 billion and $4.57 billion, respectively.
For 2018, Kinder Morgan raised capital expenditure projection by $100 million from initial estimates to $2.3 billion for growth projects.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates. There has been one revision lower for the current quarter.
At this time, KMI has an average Growth Score of C, though it is lagging a bit on the momentum front with a D. The stock was also 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.
Zacks' style scores indicate that the company's stock is suitable for value and growth investors.
Estimates have been broadly trending downward for the stock and the magnitude of this revision looks promising. Notably, KMI has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.