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Why Is Kinder Morgan (KMI) Down 2.6% Since Last Earnings Report?

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A month has gone by since the last earnings report for Kinder Morgan (KMI - Free Report) . Shares have lost about 2.6% in that time frame, outperforming 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 Q2 Earnings & Revenues Miss Estimates

Kinder Morganposted second-quarter 2019 adjusted earnings of 22 cents per share, missing the Zacks Consensus Estimate by a penny. However, the bottom line improved from the year-ago quarter’s 21 cents.

Total revenues declined year over year to $3,214 million from $3,428 million. The top line also missed the Zacks Consensus Estimate of $3,634 million.

The lower-than-expected results were owing to reduced contribution from the KM Crude & Condensate Pipeline and lower terminal volumes. This was offset partially by higher earnings from the midstream energy player’s natural gas pipelines.

Segment Analysis

Natural Gas Pipelines: Earnings before depreciation, depletion and amortization expenses, including amortization of excess cost of equity investments (EBDA) before certain items, in the segment for the June quarter of 2019 were up 7% year over year from $998 million to $1,071 million. Higher drilling activities and increasing production volumes of commodities in Eagle Ford and Haynesville plays helped the company boost its gathering and processing operations in Texas and Louisiana. This primarily enhanced the segment’s performance.

Products Pipelines: The segment’s EBDA, before certain items, for the second quarter was reported at $307 million, showing a decline of 4% from $320 million a year ago. The fall in average re-contracted rates has reduced the contribution from the KM Crude & Condensate Pipeline, hurting the segment’s contributions.

Terminals: Through this segment, Kinder Morgan generated quarterly EBDA of $290 million, down 6% from the year-ago period, due to lower storage volumes of commodities.

CO2: The segment’s EBDA declined 17% to $184 million from $221 million a year ago, hurt by lower prices of oil and natural gas liquid.

Operational Highlights

Expenses related to operations and maintenance totaled $646 million, up 4.7% from $617 million a year ago.

Operating income amounted to $973 million, up a huge 258% from the year-ago quarter’s figure.

Financials

The company’s second-quarter distributable cash flow increased to $1,128 million from $1,117 million a year ago. The company had a project backlog of $5.7 billion for the June quarter.

As of Jun 30, 2019, Kinder Morgan reported $213 million in cash and cash equivalents. The company’s long-term debt amounted to $31,848 million at quarter-end. Total debt-to-capitalization ratio at the end of the second quarter was 50.3%.  

Outlook

Kinder Morgan reaffirms 2019 dividend at $1.00 per common share. Moreover, the company maintains adjusted EBITDA and DCF for 2019 at $7.8 billion and $5 billion, respectively. However, Kinder Morgan added that its adjusted EBITDA for 2019 could be marginally below budget.

For 2019, the company has maintained its expectation to spend $3.1 billion on growth developments.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates.

VGM Scores

Currently, Kinder Morgan has an average Growth Score of C, though it is lagging a lot on the Momentum Score front with an F. However, 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 D. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. 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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