Why Kinder Morgan Earnings Didn’t Fire Up Investors

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Kinder Morgan Inc. (NYSE: KMI) reported first-quarter 2017 results after markets closed Wednesday. The midstream giant posted adjusted earnings per share (EPS) of $0.17 per share on revenues of $3.42 billion. In the same period a year ago KMI posted EPS of $0.18 on revenues of $3.2 billion. Consensus estimates called for EPS of $0.18 and revenues of $3.35 billion for the first quarter.

The company said it would pay a $0.125 dividend for the fourth quarter and continues to expect its full-year 2017 dividend to total $0.50. Kinder Morgan intends to use its cash in excess of dividends “to fund growth investments and strengthen its balance sheet.”

Distributable cash flow (DCF) for the fourth quarter totaled $0.54 per share, down from $0.55 in the year-ago quarter and up from $0.51 sequentially.

DCF is a non-GAAP measure that is roughly comparable to net income per share and is KMI’s preferred way of comparing basic cash flows to the cash dividends it expects to pay shareholders. Another way of looking at DCF is as coverage in excess of dividends. DCF for 2016 totaled $4.51 billion, down from $4.7 billion in 2015. For 2017 the company expects DCF to total $4.46 billion ($1.99 per share).

Executive chairman Richard Kinder had this to say:

We are pleased to have made additional progress on our two largest growth projects: Trans Mountain expansion and Elba Island Liquefaction. These are signature energy infrastructure assets for North America, and we expect they will contribute greatly to Kinder Morgan’s future growth. … Meanwhile, consistent with previous guidance, we continue to develop financing alternatives for the Trans Mountain project, either by bringing in a joint venture partner or conducting an initial public offering of a portfolio that would include Trans Mountain and other Kinder Morgan Canadian assets.

Now that Canada’s federal government has approved the expansion of the Trans Mountain pipeline, some analysts were expecting an announcement today related to a joint venture partner for the project. With no news on the Trans Mountain and no big move on profits or revenues, the stock is not likely to get much action.

Kinder Morgan’s current project backlog is valued at $11.7 billion, down from $12 billion at the end of the fourth quarter.

Shares closed down about 0.9% at $20.98 and traded flat in the after-hours session. The stock’s 52-week range is $16.63 to $23.36. The consensus price target on the stock was $25.33 before the earnings announcement.