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Kinder Morgan (KMI) Q3 Earnings: Is a Beat in the Cards?

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Kinder Morgan Inc (KMI - Free Report) is expected to post third-quarter 2018 results on Oct 17.

In the last reported quarter, the company delivered positive earnings surprise of 10.5%. Moreover, the company has pulled off an average positive earnings surprise of 9.8% in the last four quarters. Let’s see how things are shaping up prior to the announcement.
 

Kinder Morgan, Inc. Price and EPS Surprise

 

Kinder Morgan, Inc. Price and EPS Surprise | Kinder Morgan, Inc. Quote

 

Which way are Estimates Treading?

Let’s look at the estimate revisions to get a clear picture of what analysts are thinking about the company before earnings release.

Estimates for third-quarter earnings have seen no upward movement but a downward one in the past 30 days. The Zacks Consensus Estimate of 20 cents reflects an improvement of about 33.3% from the year-ago quarter’s figure.

Further, the Zacks Consensus Estimate for revenues is pegged at $3,533 million for the impending quarter, showing an increase of 7.7% year over year.

Factors to Consider

Kinder Morgan has the largest network of natural gas pipelines in North America, spread across almost 85,000 miles. Notably, the company’s midstream properties are linked to all the prospective plays in the United States that are rich in natural gas.

The extensive networks of natural gas pipelines, where the company has invested heavily, provide stable fee-based revenues. In fact, Kinder Morgan expects significant part of cash flow generation to come from fees charged for midstream properties in the upcoming quarters. The revenues from midstream properties will be reflected in the quarterly results.

With a dearth of pipeline capacity for transporting oil to Gulf Coast export facilities from the Permian, Kinder Morgan’s proposed Permian Highway Pipeline (PHP) Project comes at an appropriate time. It is anticipated to offer additional capacity for consistent transportation of natural gas to the U.S. Gulf Coast. This will also help the company set appropriate tariff and eradicate the Permian bottlenecks.

However, a weak balance sheet is a concern. As of second-quarter 2018, total debt —short and long term —is pegged at $37 billion. The company’s debt capitalization ratio of 51% is higher than the industry ratio of 48.5%, which depicts the company’s exposure to debt. The company may face liquidity issues, if its debt continues to rise.

Price Performance in Q3

During the quarter, Kinder Morgan has outperformed the industry. In the aforesaid period, the stock has gained 0.4%, against the industry’s decline of 3.8%.



 

Earnings Whispers

Our proven model shows that Kinder Morgan is likely to beat estimates this quarter. A stock needs to have a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen.

Earnings ESP: Earnings ESP for the company is +0.61%. This is because the Most Accurate Estimate is 21 cents and the Zacks Consensus Estimate is pegged at 20 cents. A favorable ESP serves as a leading indicator of a likely positive surprise. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.      

Zacks Rank: Kinder Morgan has a Zacks Rank #3.

Conversely, Sell-rated stocks (Zacks Rank #4 or 5) should never be considered going into an earnings announcement.

Other Stocks to Consider

Here are a few companies, which per our model, have the right combination of elements to post an earnings beat in the quarter to be reported.

Occidental Petroleum Corporation (OXY - Free Report) is an international oil and gas exploration and production company. The company has an Earnings ESP of +0.34% and sports a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

ConocoPhillips (COP - Free Report) , based in Houston, TX, is a major global exploration and production (E&P) company. The company has an Earnings ESP of +1.31% and flaunts a Zacks Rank #2.

Houston, TX-based EOG Resources, Inc (EOG - Free Report) is a major independent oil and gas exploration and production company. The company has an Earnings ESP of +5.63% and a Zacks Rank #3.

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