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Kinder Morgan (KMI) Q3 Earnings Meet, Revenues Top Estimates

Zacks Equity Research
·4 min read

Kinder Morgan, Inc. KMI reported third-quarter 2020 adjusted earnings per share of 21 cents, in line with the Zacks Consensus Estimate, thanks to contributions from Gulf Coast Express (GCX) pipeline and Elba Liquefaction projects.

The bottom line, however, declined from the year-ago quarter by a penny. A plunge in demand for refined products owing to the pandemic has hurt contributions from Products Pipelines. This in turn affected the bottom line.

Kinder Morgan, Inc. Price, Consensus and EPS Surprise

 

Kinder Morgan, Inc. Price, Consensus and EPS Surprise
Kinder Morgan, Inc. Price, Consensus and EPS Surprise

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

Total revenues declined to $2,919 million from $3,214 million in the prior-year quarter but beat the Zacks Consensus Estimate of $2,892 million.

Segment Analysis

Natural Gas Pipelines: Adjusted earnings before depreciation, depletion and amortization expenses, including amortization of excess cost of equity investments (EBDA), in the September quarter of 2020 were down 1% to $1,082 million from $1,090 million a year ago. Lower transportation and gathering volumes of natural gas primarily hurt the segment. Notably, a decline in demand for liquefied natural gas (LNG) has prompted lower transportation volumes in Kinder Morgan Louisiana Pipeline (KMLP) and Natural Gas Pipeline of America (NGPL). However, contributions from GCX pipeline and Elba Liquefaction projects partially made up for the negative.

Products Pipelines: The segment’s adjusted EBDA in the third quarter was $269 million, reflecting a decline of 20% from $336 million a year ago. The decline in transported volumes of crude & condensate along with refined products affected the performance. A plunge in demand for refined product owing to the coronavirus pandemic was responsible for the underperformance.

Terminals: Through this segment, Kinder Morgan generated quarterly adjusted EBDA of $246 million, down 17% from the year-ago period due to divestment of interests in Kinder Morgan Canada Limited last December. Lower demand for terminal assets owing to the pandemic also led to the dismal performance.

CO2: The segment’s EBDA increased 3% to $154 million from $149 million a year ago owing to a drop in operating expenditures and increased crude prices.  

Operational Highlights

Expenses related to operations and maintenance totaled $643 million, down from $668 million a year ago. Moreover, total operating costs declined to $2,100 million in the third quarter from $2,263 million in the corresponding period of 2019.

Quarterly operating income amounted to $819 million, down from $951 million a year ago.

DCF

The company’s third-quarter distributable cash flow declined to $1,085 million from $1,140 million a year ago.

Balance Sheet

As of Sep 30, 2020, Kinder Morgan reported $632 million in cash and cash equivalents. The company’s long-term debt amounted to $31,281 million at quarter-end. Total debt-to-capitalization ratio at the end of the third quarter was 51.1%.

2020 Guidance

Kinder Morgan projects 2020 DCF lower by a little more than 10% from the initial guidance of $5.1 billion, thanks to dented energy demand and low commodity prices owing to the pandemic.  The virus outbreak also compelled the company to anticipate a decline in adjusted EBITDA for 2020 of a little more than 8% from the initial guidance of $7.6 billion.

Notably, the midstream energy giant relies on its strong and stable business model and expects to pay 2020 dividend payments and discretionary spending from its internally generated cashflow. The company added that from the initial guidance, its 2020 combined expenses and sustaining capital expenditures have been reduced by a total of roughly $175 million.

Zacks Rank & Stock to Consider

The company currently has a Zacks Rank #3 (Hold). Meanwhile, a few better-ranked players in the energy space include Equinor ASA EQNR, Sunoco LP SUN and Summit Midstream Partners, LP SMLP, each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Equinor has seen upward earnings estimate revision for 2020 in the past 30 days.

Sunoco has seen upward estimate revision for its 2020 bottom line in the past 30 days.

Summit Midstream has seen upward estimate revision for its 2021 bottom line in the past 30 days.

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