Category: KMI

KMI – Kinder Morgan (KMI) Down 9% Since Last Earnings Report: Can It Rebound?

It has been about a month since the last earnings report for Kinder Morgan (KMI Free Report) . Shares have lost about 9% 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 Q2 Earnings Beat on Higher Gasoline Volumes

Kinder Morgan reported second-quarter 2021 adjusted earnings per share of 23 cents, beating the Zacks Consensus Estimate of 19 cents. The bottom line also increased from the year-ago profit of 17 cents per share. 

Total revenues surged to $3,150 million from $2,560 million in the prior-year quarter and beat the Zacks Consensus Estimate of $2,959 million.

The strong quarterly results were aided by higher contribution from Texas intrastate systems and Hiland Midstream systems. Strong recovery in demand for refined products, as reflected in increased transported gasoline and jet volumes, contributed to the outperformance.

Segment Analysis

Natural Gas Pipelines: For the June quarter of 2021, adjusted earnings before depreciation, depletion and amortization expenses, including amortization of excess cost of equity investments (EBDA), rose to $1,064 million from $1,016 million a year ago. Increase in contributions Texas intrastate systems and Hiland Midstream systems primarily aided the segment. KinderHawk and Eagle Ford gathering and processing properties’ lower contributions offset the positives partially.

Products Pipelines: The segment’s EBDA for the second quarter was $293 million, reflecting a jump from $227 million a year ago. Recovery in demand for refined products, with the gradual reopening of economy, has aided the business unit.

Gasoline transported volumes increased more than 37% year over year in the June quarter, while jet fuel volumes skyrocketed 128.6%.

Terminals: Through this segment, Kinder Morgan generated quarterly EBDA of $246 million, up from the year-ago period’s $229 million. Improvement in volumes across the midstream player’s liquids network were responsible for the outperformance.

CO2: The segment’s EBDA was recorded at $151 million, down from $156 million a year ago. The underperformance was owing to a decline in CO2 sales and crude volumes.

Operational Highlights

Expenses related to operations and maintenance totaled $582 million, down from $606 million a year ago. Total operating costs increased to $3,914 million for the second quarter from $2,842 million in the corresponding period of 2020.

DCF

The company’s second-quarter distributable cash flow (DCF) was $1,025 million compared with $1,001 million a year ago.

Balance Sheet

As of Jun 30, 2021, Kinder Morgan reported $1,365 million in cash and cash equivalents. The company’s long-term debt amounted to $30,008 million at quarter-end, resulting in a debt to capitalization of 50.8%.

At second quarter-end, it had more than $3.9 billion of borrowing capacity left under the credit facility.

2021 Guidance

The company projects DCF and adjusted EBITDA for this year at $5.4 billion and $7.9 billion, respectively. The midstream firm revised its 2021 net income down to $1.7 billion from the prior range of $2.7 billion to $2.9 billion.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in fresh estimates. The consensus estimate has shifted 6.3% due to these changes.

VGM Scores

Currently, Kinder Morgan has a subpar Growth Score of D, however its Momentum Score is doing a lot better with a B. 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.

Outlook

Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Kinder Morgan has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.

KMI – My Top High-Yield Dividend Stock to Buy Now

Kinder Morgan (NYSE:KMI), America’s largest energy transportation and storage company, continues to generate gobs of cash and distribute the majority of it to shareholders in the form of dividends. The economic recovery is increasing demand and prices for oil and natural gas, benefiting Kinder Morgan and its customers.

The company just reported an excellent second quarter and raised its full-year guidance. Here’s a breakdown of why Kinder Morgan is my top high-yield dividend stock to buy now.

A garden rake pulling U.S. $1 bills across a field of grass.

Image source: Getty Images.

Raking in tons of cash

Kinder Morgan continues to generate ample distributable cash flow (DCF) to cover its dividend obligation. DCF is a non-GAAP financial metric that Kinder Morgan uses to show the amount of net cash available for discretionary spending on dividends, share buybacks, paying down debt, or growth capital expenditures (capex).

In the second quarter, the company generated $0.45 of DCF per share, which was significantly more than its $0.27 per share dividend. New guidance forecasts full-year DCF of $5.4 billion — or $2.37 per share — and adjusted EBITDA of $7.9 billion. If it hits its targets, DCF would grow 17% year over year and adjusted EBITDA would be up 14% from 2020 — which was a pretty good year given the state of the oil and gas industry during the pandemic.

Metric

2021 (Estimated)

2020

2019

2018

DCF

$5.4 billion

$4.60 billion

$4.99 billion

$4.73 billion

Adjusted EBITDA

$7.9 billion

$6.96 billion

$7.62 billion

$7.57 billion

Data source: Kinder Morgan. 

The return of a stable and growing dividend

Generating consistently high DCF is the linchpin that Kinder Morgan’s business depends upon. To understand DCF’s importance, it’s helpful to go back in time to the oil and gas crash of 2015. During the first half of the 2010s, Kinder Morgan was ramping up spending and piling debt on its balance sheet to take advantage of high commodity prices. It all came crashing down, and Kinder Morgan was pressured to cut its dividend by 75% to just $0.50 per year in 2015.

Since then, it has been hard at work regaining shareholder trust by establishing itself as a reliable dividend stock. To do that, Kinder Morgan has had to reduce spending, divest away from poor assets, and pack up its gung-ho strategy in favor of prudence.

The following table illustrates the result of Kinder Morgan’s business transition on its performance.

KMI Capital Expenditures  (Annual) Chart

KMI Capital Expenditures (Annual) data by YCharts

Despite substantially lower capex, which peaked in 2014, Kinder Morgan continues to generate higher free cash flow (FCF) year after year. The company just raised its annual dividend to $1.08 per year, representing a dividend yield of 6.1% at today’s stock price. 

High yields are becoming harder to come by

Investors are likely cheering the fact that the S&P 500, Nasdaq Composite, and the Dow Jones Industrial Average all closed at record highs on Friday, July 23. And yes, in many ways this is great news. But the reality is that higher stock prices make it harder to find high-quality dividend stocks. All things equal, rising stock prices lower dividend yields for investors. For example, consider that the average stock in the S&P 500 now yields just 1.27%, which is hardly enough to supplement income in retirement.

KMI Dividend Yield Chart

KMI Dividend Yield data by YCharts

By comparison, Kinder Morgan’s over 6% yield is a sizable and reliable return that many income investors will find attractive.

A top-tier income stock

Given its strong performance and guidance, Kinder Morgan is proving yet again that it has the cash to back its dividend. Investors who are worried about the long-term future of fossil fuels can take solace in the fact that the majority of Kinder Morgan’s business is tied to natural gas, which has proven it can work alongside renewable energy. Long-term declines in natural gas consumption are certainly a risk to Kinder Morgan’s business, and investors should approach that risk in a way that’s best for them. However, it’s worth bearing in mind that taking on some risk is simply par for the course when it comes to getting a market-beating dividend yield.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

KMI – Kinder Morgan's Shopping Spree Continues

Kinder Morgan‘s (NYSE:KMI) growth engine has run out of gas in recent years. The company had invested heavily to build new pipelines and other infrastructure to expand its operations. However, those opportunities have been drying up because of volatile energy prices and a steady shift toward cleaner alternative energy options.

That’s leading Kinder Morgan to shift fuel sources by starting to make acquisitions again. The company recently unveiled its second deal of the year, which sets it up for future growth. Here’s a closer look at the company’s new strategic focus.

A business deal with handshake.

Image source: Getty Images.

Details on the latest deal

Kinder Morgan is buying Kinetrex Energy in a $310 million deal. Kinetrex is a leading supplier of liquified natural gas (LNG) in the Midwest with two small-scale domestic LNG production and fueling facilities. In addition, the company owns a 50% stake in a landfill renewable natural gas (RNG) facility with three more RNG facilities in development. 

The draw here is the RNG development capabilities. Kinetrex has commercial agreements in place to start construction on the new landfill-based RNG facilities. Once operational, the company’s four sites will produce more than four billion cubic feet of RNG each year. They will capture the methane produced from the decomposition of organic waste, which will reduce the greenhouse gas emissions of those sites while providing a cleaner-burning fuel source to the country’s gas distribution system.

Kinder Morgan expects the deal to be accretive to shareholders as the three RNG facilities begin operations over the next 18 months. When combined with the additional capital needed to complete the projects, the overall investment represents less than six times Kinetrex’s 2023 EBITDA.

For perspective, that’s a bit better valuation than the company’s recent $1.225 billion purchase of Stagecoach Gas Services. Kinder Morgan paid 10 times Stagecoach’s 2020 EBITDA. However, it sees that number falling to a high single-digit EBITDA multiple as it captures costs savings by integrating the pipeline and storage assets into its existing network. 

Positioning for the energy transition

Kinetrex represents the first major investment since Kinder Morgan launched its Energy Transition Ventures Group earlier this year. It formed that business unit to identify, analyze, and pursue commercial opportunities that emerge as the global economy transitions to lower-carbon energy sources. The group is taking a broad approach. It’s looking at opportunities in carbon capture and sequestration, renewable natural gas capture, hydrogen production, renewable power generation, electric transmission, and renewable diesel production. 

It has identified RNG as an ideal opportunity. RNG has the potential to grow rapidly in the near term and deliver attractive investment returns because landfills provide low-cost, predictable, and long-term methane supplies. Further, there are many potential synergies with its existing assets since RNG is already pipeline-quality gas making it interchangeable with conventional gas. As such, Kinder Morgan can transport and store it without making any modifications to its legacy infrastructure.

The company believes it can leverage Kinetrex’s expertise and platform to develop and acquire additional RNG assets. There are abundant opportunities given the currently fragmented ownership of existing RNG assets and the potential to build RNG facilities supported by wastewater treatment plants and agricultural operations in addition to landfills.

Beyond RNG, Kinder Morgan is investing in a couple of other projects to support alternative fuels. It’s spending $60 million to build new renewable diesel hubs in Northern and Southern California to serve that state’s renewable fuels market. It also has terminals and pipelines capable of blending, storing, and exporting ethanol and other biofuels while evaluating multiple opportunities to establish new hubs to handle those products. The company could also target acquisitions to further bolster its capabilities to handle biofuels.

Transitioning back to growth mode

Kinder Morgan’s focus in recent years has been on shoring up its financial profile. That’s led it to shrink by selling assets. However, it’s now shifting back to growth mode by going on the offensive and acquiring assets to increase its scale and diversify into new growth markets. These investments have the potential of growing its cash flow so that the company can sustain and expand its 6%-yielding dividend. That’s making Kinder Morgan look like a more attractive income stock these days since it appears to finally have some visible growth ahead.  

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

KMI – Is a Beat in Store for Kinder Morgan's (KMI) Q2 Earnings?

Kinder Morgan, Inc. (KMI Free Report) is set to beat earnings estimates when it reports second-quarter 2021 results on Jul 21.  

In the last reported quarter, the leading energy infrastructure company’s adjusted earnings per share of 60 cents beat the Zacks Consensus Estimate of 23 cents, thanks to higher contribution from Texas intrastate systems and the Tennessee Gas Pipeline during winter storm in February. Favorable conditions in the CO2 segment boosted the results. This was partially offset by lower demand for terminal assets and refined products.

Kinder Morgan’s earnings beat the Zacks Consensus Estimate twice, missed on another occasion and met the same once in the trailing four quarters, with the average surprise being 42%. This is depicted in the graph below:

Let’s see how things have shaped up prior to this announcement.

Trend in Estimate Revision

The Zacks Consensus Estimate for second-quarter earnings per share of 19 cents has witnessed no revision over the past seven days. The estimated figure suggests a rise of 11.8% from the prior-year reported number.

The consensus estimate for second-quarter revenues of $2.96 billion indicates a 15.6% increase from the year-ago reported figure.

What the Quantitative Model Suggests

Our proven model predicts an earnings beat for Kinder Morgan this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat.

Earnings ESP: Earnings ESP for the company is currently +14.07%. This is because the Most Accurate Estimate is pegged at 22 cents per share, higher than the Zacks Consensus Estimate of 19 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.  

Zacks Rank: Kinder Morgan currently carries a Zacks Rank #3.

Factors Driving the Better-Than-Expected Earnings

As the North American market witnessed a rapid recovery in energy demand from last year’s historic downturn, the company is expected to have seen higher utilization of midstream infrastructure assets in the second quarter. Being a leading midstream energy firm, Kinder Morgan is likely to have generated stable fee-based revenues in the quarter from the gigantic natural gas transportation network that spreads across roughly 70,000 miles.

Its $2.2-billion Permian Highway Pipeline project started full commercial operations in the beginning of 2021 and transports additional daily natural gas volumes of roughly 2.1 billion cubic feet. This is expected to have led to a year-over-year rise in natural gas transportation to the U.S. Gulf Coast, thereby resulting in higher profit levels.

The Elba Island Liquefaction facility, wherein Unit 7 came online in the second half of last year, is expected to have boosted the company’s liquefied natural gas (LNG) exports year over year. With rising LNG demand in Asian economies, Kinder Morgan is expected to have earned higher fees from LNG exporting assets in the June quarter.

Other Stocks to Consider

Here are some other companies from the Energy space that you may also want to consider, as our model shows that these too have the right combination of elements to post an earnings beat in the upcoming quarterly reports:

EOG Resources, Inc. (EOG Free Report) has an Earnings ESP of +5.31% and a Zacks Rank of 3. It is scheduled to report second-quarter results on Aug 4. You can see the complete list of today’s Zacks #1 Rank stocks here.

Hess Corporation (HES Free Report) has an Earnings ESP of +35.30% and is a Zacks #1 Ranked player. The company is scheduled to release second-quarter results on Jul 28.

Continental Resources, Inc. (CLR Free Report) has an Earnings ESP of +10.61% and a Zacks Rank #1. The firm is scheduled to release quarterly earnings on Aug 2.

KMI – Should I sell Kinder Morgan shares after Goldman Sachs lowered its price target?

Kinder Morgan, Inc. (NYSE: KMI) shares have advanced more than 35% since the beginning of the 2021 year, and the current share price stands around $18.67. Stock markets are at record highs, the global business activity is recovering, and OPEC expects a stronger oil demand recovery in the upcoming quarters. 

Fundamental analysis: Goldman Sachs lowered its price target to $15 on Kinder Morgan

Kinder Morgan shares are advancing last several months, but Goldman Sachs assigned a sell recommendation recently. Goldman Sachs reported that Kinder Morgan has outpaced a reasonable valuation level and lowered its price target to $15 on KMI.


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Research company Stifel also downgraded Kinder Morgan stock to hold from buy with an $18 price target; still, Stifel analyst Selman Akyol said that Kinder Morgan is well-positioned to participate in an anticipated economic recovery.

The company’s business has proven improvements throughout the first quarter of 2021, and the company reported better than expected results. Total revenue has increased by 67.5% Y/Y to $5.21 billion, while the GAAP EPS was $0.62 for the first fiscal quarter (beats by $0.39).

“Apart from the storm and throughout the quarter, our assets continued to provide strong cash flow as we remain guided by a sound corporate philosophy: fund our capital needs internally, maintain a healthy balance sheet, and return excess cash to our shareholders through dividend increases and/or share repurchases,” said KMI Executive Chairman Richard D. Kinder.

Kinder Morgan raised its outlook for the fiscal 2021 year and announced that it expects adjusted EBITDA in the range from $7.6 billion to $7.7 billion. The board of directors declared a $0.27/quarterly share dividend in April, representing a 2.9% increase from the prior dividend of $0.26.

Kinder Morgan’s 5.8% dividend looks safe, and the company’s management remains very optimistic about the upcoming quarters in terms of growth which is certainly positive for shareholders. Kinder Morgan maintains a strong balance sheet, and the company plans to increase investments in expansion projects.

Kinder Morgan trades at less than seven times TTM EBITDA, and with a market capitalization of $42.28 billion, shares of this company are fairly valued.

Technical analysis: Kinder Morgan shares remain in a bull market

Data source: tradingview.com

According to technical analysis, there is no risk of a positive trend reversal for now despite the fact that Goldman Sachs lowered its price target to $15. Rising above $19 supports the continuation of the bullish trend, and the next price target could be located around $19.50.

On the other side, if the price falls below $17, it would be a strong “sell” signal, and we have the open way to $16 or even $15.

Summary

Kinder Morgan shares continue to trade in a bull market, and the company should improve its position even more as the economy reopening continues. Goldman Sachs lowered its price target to $15 on Kinder Morgan, but with a market capitalization of $42.28 billion, shares of this company are fairly valued.

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KMI – Kinder Morgan (KMI) Gains As Market Dips: What You Should Know

Kinder Morgan (KMI Free Report) closed at $18.83 in the latest trading session, marking a +0.16% move from the prior day. This change outpaced the S&P 500’s 0.18% loss on the day.

Coming into today, shares of the oil and natural gas pipeline and storage company had gained 4.62% in the past month. In that same time, the Oils-Energy sector gained 5.12%, while the S&P 500 gained 0.04%.

Wall Street will be looking for positivity from KMI as it approaches its next earnings report date. In that report, analysts expect KMI to post earnings of $0.19 per share. This would mark year-over-year growth of 11.76%. Meanwhile, the Zacks Consensus Estimate for revenue is projecting net sales of $2.94 billion, up 14.72% from the year-ago period.

Looking at the full year, our Zacks Consensus Estimates suggest analysts are expecting earnings of $1.22 per share and revenue of $14.18 billion. These totals would mark changes of +38.64% and +21.21%, respectively, from last year.

Investors might also notice recent changes to analyst estimates for KMI. These revisions help to show the ever-changing nature of near-term business trends. With this in mind, we can consider positive estimate revisions a sign of optimism about the company’s business outlook.

Based on our research, we believe these estimate revisions are directly related to near-team stock moves. Investors can capitalize on this by using the Zacks Rank. This model considers these estimate changes and provides a simple, actionable rating system.

The Zacks Rank system, which ranges from #1 (Strong Buy) to #5 (Strong Sell), has an impressive outside-audited track record of outperformance, with #1 stocks generating an average annual return of +25% since 1988. Over the past month, the Zacks Consensus EPS estimate has moved 11.13% higher. KMI is currently a Zacks Rank #3 (Hold).

Looking at its valuation, KMI is holding a Forward P/E ratio of 15.36. For comparison, its industry has an average Forward P/E of 16.08, which means KMI is trading at a discount to the group.

Also, we should mention that KMI has a PEG ratio of 5.12. This metric is used similarly to the famous P/E ratio, but the PEG ratio also takes into account the stock’s expected earnings growth rate. The Oil and Gas – Production and Pipelines industry currently had an average PEG ratio of 3.22 as of yesterday’s close.

The Oil and Gas – Production and Pipelines industry is part of the Oils-Energy sector. This group has a Zacks Industry Rank of 168, putting it in the bottom 34% of all 250+ industries.

The Zacks Industry Rank gauges the strength of our individual industry groups by measuring the average Zacks Rank of the individual stocks within the groups. Our research shows that the top 50% rated industries outperform the bottom half by a factor of 2 to 1.

Make sure to utilize Zacks. Com to follow all of these stock-moving metrics, and more, in the coming trading sessions.