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Is a Beat Likely for Kinder Morgan (KMI) in Q3 Earnings?

Zacks Equity Research

Kinder Morgan, Inc. KMI is scheduled to report third-quarter 2019 earnings on Oct 16.  

The energy infrastructure company’s earnings missed estimates only once in the trailing four quarters, with the average positive surprise being 0.2%.

Kinder Morgan, Inc. Price and EPS Surprise

Kinder Morgan, Inc. Price and EPS Surprise

Kinder Morgan, Inc. price-eps-surprise | Kinder Morgan, Inc. Quote

Let’s see how things are shaping up prior to this announcement.

Which Way are Estimates Treading?

Let’s take a look at estimate revisions to get a clear picture of analysts’ opinion on the stock before the earnings release.

The Zacks Consensus Estimate for third-quarter earnings per share of 22 cents has remained unchanged over the past seven days. The estimated figure suggests an improvement of 4.8% from the prior-year reported number.

The consensus estimate for second-quarter revenues of $3.5 billion indicates no change from the year-ago reported figure.

What the Quantitative Model Suggests

Our proven model conclusively shows that Kinder Morgan is likely to beat estimates this earnings season. This is because it has the right combination of a positive Earnings ESP and a favorable Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold).

Earnings ESP: Kinder Morgan has an Earnings ESP of +11.46%. This is because the Most Accurate Estimate of 25 cents per share is pegged higher than the Zacks Consensus Estimate of 22 cents. You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.

Zacks Rank: Kinder Morgan carries a Zacks Rank #3, which increases the predictive power of ESP. Further, a positive ESP in the stock’s combination makes us confident about its earnings beat this reporting cycle.

Conversely, all Sell-rated stocks (#4 or 5) should never be considered going into an earnings announcement, especially when the company is seeing negative estimate revisions.

What is Driving the Better-Than-Expected Earnings?

Owing to sturdy demand for natural gas transportation assets, the midstream company is expected to generate steady fee-based revenues in the to-be-reported quarter.

Increased hydrocarbon production boosted the country’s exports in the last few quarters, which further drove the company’s earning capabilities. Its third-quarter results will likely reflect this upside potential. Notably, the company brought the Gulf Coast Express Pipeline Project online on Sep 25, 2019. Even though just for a few days, the 2 billion cubic feet per day pipeline is expected to boost third-quarter profits.

Markedly, Kinder Morgan generates bulk of fee-based revenues from refined products and liquid pipelines. With buoyant demand for refined products on the domestic and international front, the company’s refined product pipelines are expected to reap robust profits in the quarter to be reported.

Other Stocks to Consider

Some other energy stocks with the perfect mix of elements to beat on earnings in the upcoming quarterly release are:

Noble Corporation plc NE is set to report third-quarter 2019 earnings on Oct 30. The stock has an Earnings ESP of +2.19% and is a Zacks #2 Ranked player. You can see the complete list of today’s Zacks #1 Rank stocks here.

Phillips 66 PSX has an Earnings ESP of +2.08% and a Zacks Rank of 3. The company is slated to announce third-quarter 2019 earnings on Oct 25.

Plains All American Pipeline, L.P. PAA has an Earnings ESP of +1.91% and is a #3 Ranked player. The company is anticipated to release third-quarter 2019 earnings on Nov 5.

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