Kinder Morgan (KMI) Misses On Q1 Earnings, Beats Revenues

Energy infrastructure company Kinder Morgan Inc. (NYSE:KMI) reported first-quarter 2017 earnings of 17 cents per share from continuing operations. The bottom line missed the Zacks Consensus Estimate of 18 cents per share but increased about 42% from 12 cents 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 12.5 cents per share (50 cents 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%.

Q1 Price Performance

During the January–March quarter of this year, Kinder Morgan’s shares gained almost 5% compared with 2.4% increase for the Zacks categorized Oil & Gas-Production/Pipeline industry.

Outlook

Kinder Morgan reaffirmed its dividend guidance. The company is likely pay dividends of 50 cents 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.

Zacks Rank and Stocks to Consider

Kinder Morgan currently has a Zacks Rank #3 (Hold). Some better-ranked players in the same space are Antero Resources Corporation (NYSE:AR) , W&T Offshore Inc. (NYSE:WTI) and Concho Resources Inc. (NYSE:CXO) . Antero Resources and W&T Offshore sport a Zacks Rank #1 (Strong Buy), while Concho carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Antero Resources beat the Zacks Consensus Estimate in each of the trailing four quarters with an average surprise of 239.10%.

W&T Offshore posted an average positive earnings surprise of 50.53% over the last four quarters.

Concho is expected to post year-over-year earnings growth of 71.8% for 2017.

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