Kinder Morgan Inc.
) reported fourth quarter 2012 earnings of 32 cents a share from
continuing operations, failing to meet the Zacks Consensus
Estimate of 34 cents a share. However, the quarterly earnings
increased from the year-earlier profit level of 19 cents on the
back of higher volumes in most of its businesses.
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For full-year 2012, Kinder Morgan posted earnings of 61 cents a
share from continuing operations compared with 64 cents recorded
in 2011. The earnings also failed to meet the Zacks Consensus
Estimate of 90 cents.
Total revenue for the quarter increased 59.0% year over year to
$3,079.0 million. The reported figure surpassed our expectation
of $2,978.0 million. In 2012, total revenue increased to $9,973
million from $7,943 million reported in 2011 and beat the Zacks
Consensus Estimate of $9,813 million.
Kinder Morgan boosted its quarterly dividend to 37 cents a share
($1.48 per share annualized), up 19.4% from 31 cents ($1.24 per
share annualized) paid in the fourth quarter of 2011.
Management set a dividend target of $1.57 a share for 2013, up
16% from the 2012 budget target of $1.35 per share and 12% from
the 2012 declared dividend of $1.40 per share.
The company's growth curve will be driven by its ownership of the
general partners of both
Kinder Morgan Energy Partners, L.P.
El Paso Pipeline Partners, L.P.
). The natural gas assets acquired by Kinder Morgan through the
El Paso Corporation will further augment dividend growth.
Total expenses in the quarter were $2,114.0 million, representing
a 41.3% increase from $1,496.0 million spent in the fourth
quarter of 2011.
Operating income came in at $965.0 million in the quarter,
representing a substantial 118.8% growth from the comparable
quarter a year ago. Operating margin was 31.3% compared with
22.8% in the year-ago quarter.
Cash available for dividend payments was $439.0 million in the
fourth quarter of 2012, an increase of 81% from $243.0 million in
the comparable quarter last year. For 2012, Kinder Morgan
reported $1,411 billion cash available to pay dividends, up 62%
from $866 million in 2011 and ahead of the company's published
annual budget of $985 million, mainly due to the El Paso
We believe Kinder Morgan will be able to seize attractive
investment opportunities in the near term, particularly in the
Eagle Ford and Haynesville shale plays. The company intends to
invest about $3 billion in expansion and acquisitions in 2013.
The completion of the El Paso acquisition has enabled Kinder
Morgan to leverage the extensive natural gas pipeline network and
has given it access to major markets. The gradual dropdown of El
Paso's assets to its partnerships will further add value.
Again, increased exploration and production volumes along with
continuous expansion of the Transmountain oil pipeline, terminal
volume growth and upcoming new projects would further enhance
However, the El Paso acquisition, which enabled Kinder Morgan to
shift toward natural gas, has also raised concerns amid a
sluggish natural gas price environment. Again, the company
incurred a debt to fund the cash portion of the El Paso
acquisition, thus keeping leverage metrics high. Though Kinder
Morgan is expected to de-lever over time, we believe it may
perhaps take several years to reach investment-grade credit
Kinder Morgan holds a Zacks Rank #2 (short-term Buy rating). For
the longer term, we maintain our Neutral recommendation.