Midstream energy assets operator Kinder Morgan Inc. KMI 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.
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, with an Earnings ESP of +3.45% and a Zacks Rank #1.
TransCanada Corporation TRP, with an Earnings ESP of + 7.84% and a Zacks Rank #1.
The Williams Companies Inc WMB, with an Earnings ESP of + 22.22% and a Zacks Rank #2.
Today's Stocks from Zacks' Hottest Strategies
It's hard to believe, even for us at Zacks. But while the market gained +18.8% from 2016 - Q1 2017, our top stock-picking screens have returned +157.0%, +128.0%, +97.8%, +94.7%, and +90.2% respectively.
And this outperformance has not just been a recent phenomenon. Over the years it has been remarkably consistent. From 2000 - Q1 2017, the composite yearly average gain for these strategies has beaten the market more than 11X over. Maybe even more remarkable is the fact that we're willing to share their latest stocks with you without cost or obligation. See Them Free>>
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Boardwalk Pipeline Partners L.P. (BWP) : Free Stock Analysis Report
Williams Companies, Inc. (The) (WMB) : Free Stock Analysis Report
Kinder Morgan, Inc. (KMI) : Free Stock Analysis Report
TransCanada Corporation (TRP) : Free Stock Analysis Report
To read this article on Zacks.com click here.