It has been about a month since the last earnings report for Kinder Morgan (KMI). Shares have lost about 12.8% 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 the most recent earnings report in order to get a better handle on the important drivers.
Kinder Morgan Q4 Earnings & Revenues Miss Estimates
Kinder Morgan reported fourth-quarter 2024 adjusted earnings per share of 32 cents, which missed the Zacks Consensus Estimate of 33 cents. The bottom line improved from 28 cents in the prior-year quarter.
Total quarterly revenues of $3.99 billion missed the Zacks Consensus Estimate of $4.16 billion. The top line decreased from $4.04 billion in the prior-year quarter.
The lower-than-expected quarterly earnings were primarily due to decreased volumes on certain systems, asset divestitures, and lower crude, CO2 and NGL volumes.
Segmental Analysis
Natural Gas Pipelines: In the December-end quarter, adjusted earnings before depreciation, depletion and amortization expenses (EBDA), including the amortization of the excess cost of equity investments, increased to $1.44 billion from $1.33 billion a year ago. The segment's performance benefited from higher contributions from Texas Intrastate system, additional contributions from the STX Midstream acquisition and continued increases from expansion projects on the Tennessee Gas Pipeline. However, this was partially offset by lower contributions from the gathering systems due to reduced volumes.
Product Pipelines: The segment’s EBDA in the fourth quarter was $302 million, up from $278 million recorded a year ago. Contributions from the Products Pipelines segment rose due to higher rates in the fourth quarter, and the impact of declining commodity prices in the previous year, partly offset by lower volumes on the Hiland gathering system. Refined product volumes increased 2%, while crude and condensate volumes fell 5%.
Terminals: Kinder Morgan generated a quarterly EBDA of $282 million from the segment, higher than the year-ago period’s $266 million. The segment’s earnings rose due to higher rates from the Jones Act tanker fleet, increased contributions from petroleum coke handling, and higher liquids terminal contributions driven by expansion projects.
CO2: The segment’s EBDA was $162 million, down from the year-ago quarter’s $170 million. The underperformance was primarily due to asset divestitures, lower crude oil, CO2 and NGL volumes, partially offset by contributions from the North McElroy Unit and lower power costs.
Operational Highlights
Expenses related to operations and maintenance totaled $761 million, up from $745 million registered a year ago. Total operating costs, expenses, and other expenditures fell to $2,879 million from $2,937 million.
Distributable Cash Flow (DCF)
Kinder Morgan’s fourth-quarter DCF was $1.26 billion compared with $1.17 billion a year ago.
Balance Sheet
As of Dec. 31, 2024, KMI reported $88 million in cash and cash equivalents. At the quarter's end, its long-term debt amounted to $29.8 billion.
Guidance
For 2025, Kinder Morgan projects a net income of $2.8 billion, up 8% from the 2024 level, and an Adjusted EPS of $1.27, up 10%. The company expects to declare dividends of $1.17 per share, up 2% from the prior-year figure. It also anticipates budgeted Adjusted EBITDA of $8.3 billion, up 4% from the previous year’s level.
KMI also forecasts a Net Debt-to-Adjusted EBITDA ratio of 3.8x, excluding potential contributions from the Outrigger Energy II acquisition. These estimates assume average 2025 prices of $68 per barrel for WTI crude and $3.00/MMBtu for Henry Hub natural gas.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision have trended downward during the past month.
VGM Scores
At this time, 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 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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This article originally published on Zacks Investment Research (zacks.com).
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
