Why Is Kinder Morgan (KMI) Down 6.1% Since the Last Earnings Report?

It has been about a month since the last earnings report for Kinder Morgan, Inc. KMI. Shares have lost about 6.1% 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 drivers.

First-Quarter 2017 Results

Kinder Morgan reported first-quarter 2017 earnings of $0.17 per share from continuing operations. The bottom line missed the Zacks Consensus Estimate of $0.18 per share but increased about 42% from $0.12 reported a year ago.

The lower-than-expected earnings may be attributed to higher expenses and the negative impact on the tariff rates of Colorado Interstate Gas Company pipeline following the rate case settlement in 2016. However, the year-over-year improvement in the bottom line was driven by higher contribution from Elba Express pipeline along with improved CO2 volumes.

Total revenue for the quarter jumped 7.2% year over year to $3,424 million. Moreover, the top line surpassed the Zacks Consensus Estimate of $3,146 million. Increased contribution from the liquid terminals and favorable outcome from Natural Gas Pipeline Company of America led to the improvement.

Dividend

Kinder Morgan maintained its quarterly dividend at $0.125 per share ($0.50 per share annualized). The dividend is payable on May 15, to shareholders on record as of May 1, 2017.

Segment Analysis

Natural Gas Pipelines: Operating income from this segment was $1,055 million, up 6% from $994 million in the year-ago comparable quarter. Higher contribution from the Elba Express pipeline and favorable outcome from Natural Gas Pipeline Company of America led to the improvement. The positives were partially offset by the adverse impact on the tariff rates of Colorado Interstate Gas Company pipeline following the rate case settlement on 2016.

CO2: The segment reported earnings of $218 million, which increased 17% from $187 million in first-quarter 2016. Higher volumes owing to considerable demand from third parties supported the improvement. However, the upside was partially limited by lower commodity prices.

Terminals: This business unit reported profit of $307 million, which improved 18%from $260 million in the January–March quarter of 2016, mainly due to significant contributions from the liquid terminals.

Products Pipelines: This segment recorded earnings of $287 million, up 62% year over year. Higher refined products volumes were responsible for the improvement.

Operational Highlights

Total expenses in the quarter were $2,444 million, up 3% from $2,379 million spent in the first quarter of 2016.

Operating income of $980 million compared favorably with an operating profit of $816 million in the year-ago quarter.

First-quarter net income of $445 million increased from $314 million in the comparable quarter in 2016.

Financials

The company reported first-quarter distributable cash flow of $1,215 million compared with $1,233 million in the year-earlier quarter.

As of Mar 31, 2017, Kinder Morgan had cash and cash equivalents of $396 million. The company’s long-term debt amounted to $34,285 million at the end of the quarter. Total debt-to-capitalization ratio at the end of first-quarter 2017 was 52.2%.

Outlook

Kinder Morgan reaffirmed its dividend guidance. The company is likely pay dividends of $0.50 per share in 2017. It continues to expect EBITDA and distributable cash flow of about $7.2 billion and $4.46 billion, respectively.

For 2017, Kinder Morgan maintains the capital expenditure projection at about $3.2 billion for growth projects.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates flatlined during the past month. There has been one revision higher for the current quarter compared to one lower.

Kinder Morgan, Inc. Price and Consensus

 

Kinder Morgan, Inc. Price and Consensus | Kinder Morgan, Inc. Quote

VGM Scores

At this time, the stock has an average Growth Score of 'C', though it is lagging a bit on the momentum front with an 'D'. Charting a somewhat similar path, 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 aggregate VGM Score of 'C'. If you aren't focused on one strategy, this score is the one you should be interested in.

The company's stock is suitable for growth and value investors.

Outlook

The stock has a Zacks Rank #3 (Hold). We are looking for an inline return from the stock in the next few months.

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