Kinder Morgan (KMI) Down 3% Since Earnings Report: Can It Rebound?
It has been about a month since the last earnings report for Kinder Morgan, Inc. KMI. Shares have lost about 3% in that time frame, underperforming the market.
Will the recent negative trend continue leading up to the stock's next earnings release, or is it due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Fourth-Quarter 2016 Results
Kinder Morgan reported fourth-quarter 2016 earnings of $0.19 per share from continuing operations. The bottom line surpassed the Zacks Consensus Estimate of $0.18 per share but decreased about 30% year over year from $0.27.
Total revenue for the quarter declined 6.8% year over year to $3,389 million. Nonetheless, the top line surpassed the Zacks Consensus Estimate of $3,320 million.
The better-than expected results were supported by significantly low expenses, whereas the year-over-year decline was owing to lower contributions from Natural Gas Pipelines and CO2 segments. Decrease in crude prices negatively impacted the CO2 unit, while the shipment of much lower volumes due to reduced natural drilling operations affected the Natural Gas Pipelines segment.
Dividend
Kinder Morgan maintained its quarterly dividend at $0.125 per share ($0.50 per share annualized). The dividend is payable on Feb 15, to shareholders on record as of Feb 1, 2017.
Operational Highlights
Total expenses in the quarter were $2,455 million, down 36.7% from $3,880 million spent in the fourth quarter of 2015.
Operating income of $934 million compared unfavorably with an operating loss of $244.0 million in the year-ago quarter. The quarterly results reflect an improvement of 482.8% from the fourth-quarter 2015 figures.
Fourth-quarter net income of $170 million compared unfavorably with net loss of $721 million in the comparable quarter in 2015.
Financials
The company reported fourth-quarter distributable cash flow of $1,147 million compared with $1,233 million in the year-earlier quarter. The decrease is mainly attributable to lower contributions from SNG as a result of a 50% sale of the pipeline during the third quarter of 2016 (which helped improve KMI’s leverage metrics). Decline in its CO2 segment as well as lower realized crude oil prices and lower volumes also contributed to the underperformance.
As of Dec 31, 2016, Kinder Morgan had $684 million in cash and cash equivalents. The company’s long-term debt amounted to $36,105 million at the end of the quarter.
Outlook
Kinder Morgan is likely to pay dividends of $0.50 per share in 2017. Given the prolonged weakness in commodity prices, the company expects EBITDA and distributable cash flow of about $7.2 billion and $4.46 billion, respectively.
For 2017, Kinder Morgan projects capital expenditure of about $3.2 billion for growth projects.
How Have Estimates Been Moving Since Then?
Following the release, investors have witnessed a downward trend in fresh estimate. There has been one revision higher for the current quarter compared to three lower.
Kinder Morgan, Inc. Price and Consensus
Kinder Morgan, Inc. Price and Consensus | Kinder Morgan, Inc. Quote
VGM Scores
At this time, Kinder Morgan's stock has a subpar score of 'D' on both growth and momentum front. 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 aggregte VGM Score of 'D'. If you aren't focused on one strategy, this score is the one you should be interested in.
The company's stock is suitable solely for value investors based on our styles scores.
Outlook
Estimates have been broadly trending downward for the stock. The magnitude of this revision also indicates a downward shift. Notably the stock has a Zacks Rank #3 (Hold). We are expecting an inline return from the stock in the next few months.
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