It has been about a month since the last earnings report for Kinder Morgan (KMI). Shares have lost about 1.1% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Kinder Morgan due for a breakout? Before we dive into how investors and analysts have reacted as of late, let’s take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Kinder Morgan Q3 Earnings Miss Estimates
Kinder Morgan reported third-quarter 2023 adjusted earnings per share of 25 cents, missing the Zacks Consensus Estimate by a penny. The bottom line is in line with the year-ago quarter’s earnings of 25 cents per share.
Total quarterly revenues of $3,907 million missed the Zacks Consensus Estimate of $4,253 million and also declined from $5,177 million in the prior-year quarter.
Lower-than-expected quarterly earnings were primarily driven by a decline in realized natural gas liquid price. The negatives were partially offset by higher gathering and transport volumes.
Segmental Analysis
Natural Gas Pipelines: In the September-end quarter, adjusted earnings before depreciation, depletion and amortization expenses, including the amortization of the excess cost of equity investments (EBDA), rose to $1,199 million from $1,159 million a year ago. The reported figure is slightly below our estimated EBDA of $1,221.4 million for the business unit. Higher gathering and transport volumes primarily aided the segment.
Product Pipelines: The segment’s EBDA in the third quarter was $313 million, reflecting an increase from $257 million a year ago. The reported figure also beat our estimated figure of $249.8 million. Higher volumes of gasoline and jet fuel aided the segment.
Terminals: Through the segment, Kinder Morgan generated quarterly EBDA of $259 million, higher than the year-ago period’s number of $240 million and our estimate of $232.9 million. Increased average charter rates aided the outperformance.
CO2: The segment’s EBDA was $175 million, down from the year-ago quarter’s figure of $195 million and our estimate of $181.2 million. The underperformance was caused by a decline in realized natural gas liquids prices.
Operational Highlights
Expenses related to operations and maintenance totaled $738 million, up from $712 million a year ago and our estimate of $719 million. Total operating costs, expenses and other were down to $2,969 million from $4,246 million and our estimate of $3,470 million. Our estimate for total operating costs, expenses and other was higher since our projection for the cost of sales for third-quarter 2023 was considerably elevated on account of our higher expectations for revenues.
Distributable Cash Flow (DCF)
Kinder Morgan’s third-quarter DCF was $1,094 million compared with $1,122 million a year ago.
Balance Sheet
As of Sept 30, 2023, KMI reported $80 million in cash and cash equivalents. Its long-term debt amounted to $27,863 million at the quarter end.
Guidance
For 2023, Kinder Morgan reiterated its net income guidance of $2.5 billion. For this year, KMI expects DCF to be $4.8 billion. For 2023, the midstream energy player projects its dividend at $1.13 per share, suggesting a year-over-year increase of 2%.
How Have Estimates Been Moving Since Then?
It turns out, estimates review have trended downward during the past month.
VGM Scores
Currently, Kinder Morgan has a subpar Growth Score of D, though it is lagging a bit on the Momentum Score front with an F. However, 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 F. If you aren’t focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions has been net zero. Notably, Kinder Morgan has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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