It has been about a month since the last earnings report for Kinder Morgan (KMI). Shares have added about 0.3% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Kinder Morgan due for a pullback? 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 drivers.
Kinder Morgan Q2 Earnings Rise Y/Y
Kinder Morgan, Inc. reported second-quarter 2024 adjusted earnings per share of 25 cents, in line with the Zacks Consensus Estimate. The bottom line increased from the year-ago quarter’s level of 24 cents.
Total quarterly revenues of $3.6 billion missed the Zacks Consensus Estimate of $3.9 billion. However, the top line increased from $3.5 billion in the prior-year quarter.
The in-line quarterly results were primarily due to higher financial contributions from the Natural Gas Pipelines, Products Pipelines and Terminals business segments. However, there was an increase in total costs and expenses during the quarter.
Dividend Hike
Kinder Morgan announced a quarterly cash dividend of 28.75 cents per share for the second quarter of 2024 (annualized dividend of $1.15). This represents a 2% increase from the second-quarter 2023 level. The dividend is payable on Aug 15, 2024, to shareholders of record as of Jul 31, 2024.
Segmental Analysis
Natural Gas Pipelines: In the June-end quarter, adjusted earnings before depreciation, depletion and amortization expenses, including the amortization of the excess cost of equity investments (EBDA), increased to $1.23 billion from $1.20 billion a year ago. The segment's performance benefited from increased contributions from the Texas Intrastate system and additional inputs from the STX Midstream acquisition. However, this was partially offset by reduced contributions from gathering systems due to asset divestitures and lower commodity prices.
Product Pipelines: The segment’s EBDA in the second quarter was $301 million, up from $286 million recorded a year ago. Higher interest rates on existing assets, combined with financial contributions from newly launched capital projects, primarily supported the segment’s performance.
Terminals: Kinder Morgan generated quarterly EBDA of $281 million from the segment, higher than the year-ago period’s $261 million. Liquid terminal expansions and higher rates on Jones Act tankers boosted Terminals. Additionally, the bulk business benefited from increased coal, petroleum coke and soda ash volumes.
CO2: The segment’s EBDA was $164 million, down from the year-ago quarter’s $175 million. The underperformance resulted primarily from lower CO2 sales volumes.
Operational Highlights
Expenses related to operations and maintenance totaled $741 million, up from $685 million registered a year ago. Total operating costs, expenses, and other expenditures also rose to $2,534 million from $2,471 million.
Distributable Cash Flow (DCF)
Kinder Morgan’s second-quarter DCF was $1.10 billion compared with $1.07 billion a year ago.
Balance Sheet
As of Jun 30, 2024, KMI reported $98 million in cash and cash equivalents. Its long-term debt amounted to $28.5 billion at the quarter's end.
Guidance
Kinder Morgan's projections for 2024 remain unchanged. The company still expects its net income, including earnings from the recently acquired STX Midstream assets, to be $2.7 billion, up 15% from the 2023 level.
Additionally, KMI anticipates a DCF of $5 billion ($2.26 per share) and an adjusted EBITDA of $8.16 billion, each indicating 8% growth from the previous year’s reported figure. It aims to close the year with a net debt-to-adjusted EBITDA ratio of 3.9 times.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates.
VGM Scores
Currently, Kinder Morgan has an average Growth Score of C, a grade with the same score on the momentum front. Following the exact same course, 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.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of this revision indicates a downward shift. 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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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
