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Kinder Morgan (KMI) Up 7.6% Since Last Earnings Report: Can It Continue?

It has been about a month since the last earnings report for Kinder Morgan (KMI). Shares have added about 7.6% 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 the most recent earnings report in order to get a better handle on the important catalysts.

Kinder Morgan Beats on Q1 Earnings, Hikes Dividend

Kinder Morgan, Inc. reported first-quarter 2024 adjusted earnings per share of 34 cents, beating the Zacks Consensus Estimate by a penny. The bottom line increased from the year-ago quarter’s earnings of 30 cents.

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Total quarterly revenues of $3.8 billion missed the Zacks Consensus Estimate of $4.4 billion. The top line also declined from $3.9 billion in the prior-year quarter.

Strong quarterly earnings were primarily driven by increased financial contributions from the Natural Gas Pipelines, Products Pipelines and Terminals business segments. Reductions in total costs and expenses further enhanced the quarterly performance.

Dividend Hike

Kinder Morgan announced a quarterly cash dividend of 28.75 cents per share for the first quarter of 2024 (annualized dividend of $1.15). This represents a 2% hike from the first quarter of 2023. The dividend is payable May 15, 2024, to shareholders of record as of Apr 30, 2024.

Segmental Analysis

Natural Gas Pipelines: In the March-end quarter, adjusted earnings before depreciation, depletion and amortization expenses, including the amortization of the excess cost of equity investments (EBDA), increased to $1.5 billion from $1.4 billion a year ago. The segment's performance was significantly enhanced by increased margins on the company's storage assets and higher throughput in gathering systems. Additionally, the recent acquisition of STX Midstream also contributed positively to the results.

Product Pipelines: The segment’s EBDA in the first quarter was $293 million, reflecting an increase from $251 million a year ago. Higher interest rates on existing assets, combined with the financial contributions from newly launched capital projects, primarily supported the performance of the segment.

Terminals: Through the segment, Kinder Morgan generated quarterly EBDA of $269 million, higher than the year-ago period’s $254 million. Liquids terminal expansions and higher rates on Jones Act tankers boosted the segment. The gains were partially offset by reduced petroleum coke volumes due to refinery turnarounds and unplanned outages.

CO2: The segment’s EBDA was $166 million, down from the year-ago quarter’s $173 million. The underperformance resulted primarily from lower CO2 sales volumes.

Operational Highlights

Expenses related to operations and maintenance totaled $680 million, up from $639 million a year ago. Yet, total operating costs, expenses and others were marginally down to $2,619 million from $2,694 million.

Distributable Cash Flow (DCF)

Kinder Morgan’s first-quarter DCF was $1.42 billion compared with $1.40 billion a year ago.

Balance Sheet

As of Mar 31, 2024, KMI reported $119 million in cash and cash equivalents. Its long-term debt amounted to $30.1 billion at the quarter end.

Guidance

For 2024, Kinder Morgan has projected a net income, including earnings from the newly acquired STX Midstream assets, of $2.7 billion, suggesting a 15% increase from that reported in 2023.

Additionally, the company anticipates a DCF of $5 billion ($2.26 per share) and an adjusted EBITDA of $8.16 billion for 2024, each indicating 8% growth from the previous year’s reported figures. KMI aims to close the year with a net debt-to-adjusted EBITDA ratio of 3.9 times.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates have trended upward during the past month.

VGM Scores

Currently, Kinder Morgan has a nice Growth Score of B, though it is lagging a bit on the Momentum Score front with a C. 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 B. 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 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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