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Can Kinder Morgan (KMI) Beat Estimates This Earnings Season?

Zacks Equity Research
ONE Gas (OGS) reports strong Q1 results, courtesy of new rates, colder-than-normal weather and customer growth.

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

The energy infrastructure company has average positive earnings surprise of 5.1% for the last four quarters. 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 analyst opinion on the stock before the earnings release.

The Zacks Consensus Estimate for first-quarter earnings per share of 25 cents has remained the same over the past seven days. The latest consensus mark reflects a year-over-year improvement of 13.7%.

The consensus estimate for first-quarter revenues of $3.6 billion indicates an increase of 4.8% from the year-ago quarter.

What Our Quantitative Model Says

Our proven model shows that Kinder Morgan is likely to beat estimates in the to-be-reported quarter. This is because it has the right combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold).

Earnings ESP: Kinder Morgan has an Earnings ESP of +4.21%. This is because the Most Accurate Estimate of 27 cents per share is higher than the Zacks Consensus Estimate of 25 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 of 3, when combined with a +4.21% ESP, makes us confident about an earnings beat.

We caution against all Sell-rated stocks (#4 or 5) going into an earnings announcement, especially when the company is seeing negative estimate revisions.

What is Driving the Better-Than-Expected Earnings?

The company owns North America’s largest natural gas transportation network that spreads across roughly 70,000 miles. Notably, the pipeline network, transporting roughly 40% of total natural gas being used in the United States, connects major markets with almost all prolific shale plays in America. Owing to heightened demand for natural gas transportation assets, Kinder Morgan is expected to report steady fee-based revenues in the quarter.

Kinder Morgan generates a bulk of its fee-based revenues from refined products and liquid pipelines. The midstream energy firm transports roughly 1.7 million barrel per day (MMBbl/D) of refined products through pipelines spread across 6,900 miles. Moreover, the company transports oil and natural gas liquids through pipeline network covering 5,800 miles.

Importantly, Kinder Morgan has investment grade rated debt, reflecting a strong balance sheet. Notably, the company’s debt has recently seen a rating upgrade by Standard & Poor's and Moody's to BBB and Baa2, respectively.

Other Stocks to Consider

Some other energy stocks with the right combination of elements to come up with an earnings beat this time around are:

ConocoPhillips COP has an Earnings ESP of +2.26% and a Zacks Rank #1. The company is slated to announce first-quarter earnings on Apr 30. You can see the complete list of today’s Zacks #1 Rank stocks here.

Antero Resources Corporation AR is set to report first-quarter earnings on May 1. The stock has an Earnings ESP of +3.57% and a Zacks Rank of 1.

Royal Dutch Shell plc RDS.A has an Earnings ESP of +12.14% and a Zacks Rank of 1. The company is anticipated to release first-quarter earnings on May 2.

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Royal Dutch Shell PLC (RDS.A) : Free Stock Analysis Report
 
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Antero Resources Corporation (AR) : Free Stock Analysis Report
 
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