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Is a Beat Likely for Kinder Morgan (KMI) in Q2 Earnings?

Zacks Equity Research

Kinder Morgan, Inc. KMI is scheduled to report second-quarter 2019 earnings on Jul 17.  

On a positive note, this energy infrastructure company’s earnings did not miss estimates in the trailing four quarters, the average positive surprise being 3.9%.

Kinder Morgan, Inc. Price and EPS Surprise

Kinder Morgan, Inc. Price and EPS Surprise

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

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

Which Way Are Estimates Treading?

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

The Zacks Consensus Estimate for second-quarter earnings per share of 23 cents has been reaffirmed over the past seven days. The latest consensus mark suggests an improvement of 9.5% from the prior-year reported number.

The consensus estimate for second-quarter revenues of $3.6 billion indicates an increase of 5.4% from the year-ago quarter’s 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 top Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold).

Earnings ESP: Kinder Morgan has an Earnings ESP of +5.00%. This is because the Most Accurate Estimate of 24 cents per share is pegged higher than the Zacks Consensus Estimate of 23 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, Kinder Morgan is expected to report steady fee-based revenues in the to-be-reported quarter. Notably, the company has the largest network of natural gas pipeline in North America that spreads across almost 84,000 miles. Most importantly, the company’s midstream properties are linked to all the prospective plays in the United States that are rich in natural gas and the production has surged in the last few quarters.

Increased hydrocarbon production boosted the country’s exports in the last few quarters, which further drove the company’s earning capabilities. The second-quarter results will likely reflect this upside.

Moreover, Kinder Morgan generates a bulk of its fee-based revenues from refined products and liquid pipelines. With buoyant demand for refined products on the domestic front as well as internationally, the company’s refined product pipelines are expected to reap robust revenues this quarter to be reported.

Other Stocks to Consider

Some other energy stocks worth considering with the perfect mix of elements to beat on earnings this time around are:

ConocoPhillips COP has an Earnings ESP of +4.41% and a Zacks Rank of 3. The company is slated to announce second-quarter 2019 earnings on Jul 30. You can see the complete list of today’s Zacks #1 Rank stocks here.

TransCanada Corporation TRP is set to report second-quarter 2019 earnings on Aug 1. The stock has an Earnings ESP of +3.36% and is a Zacks #3 Ranked player.

Royal Dutch Shell plc RDS.A has an Earnings ESP of +1.22% and is a #3 Ranked player. The company is anticipated to release second-quarter 2019 earnings on Aug 1.

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