Why Kinder Morgan Shares Aren't Sagging
Kinder Morgan Inc. (NYSE: KMI) reported third-quarter 2019 results after markets closed Wednesday. The midstream giant posted adjusted earnings per share (EPS) of $0.22 per share on revenues of $3.21 billion. In the same period a year ago, it posted EPS of $0.20 on revenues of $3.52 billion. Consensus estimates called for EPS of $0.24 and revenues of $3.50 billion for the quarter.
Kinder Morgan also said it will pay its previously announced $0.25 quarterly share dividend out of net income totaling $506 million (down from $693 million in the year-ago quarter) and distributable cash flow (DCF) of $1.14 billion (up from $1.09 billion).
CEO Steve Kean commented:
We … continued to maintain fiscal discipline by funding growth capital through operating cash flows without accessing capital markets, as we have been doing since the first quarter of 2016.
Kean also touted the company’s latest additions:
Our Gulf Coast Express Pipeline (GCX) went in service on September 25th, ahead of schedule. GCX will play a significant role in reducing flaring in West Texas by providing an outlet for associated gas produced in the Permian. … Also late in September, the first of ten liquefaction units of the Elba Liquefaction project went in commercial service, upon which we began recognizing approximately 70 percent of the full project revenues.
The DCF increase was the result of greater contributions from the Natural Gas Pipelines and Products Pipelines segments and lower preferred dividend payments, partially offset by lower commodity prices and volumes impacting our CO2 segment and the elimination of the Kinder Morgan Canada business segment following the Trans Mountain sale. Kinder Morgan recognized the Trans Mountain sale in the second quarter.
The company said it continues to expect to pay its scheduled annual dividend of $1.00 per share in 2019 and post DCF of approximately $5 billion ($2.20 per share) on adjusted EBITDA of about $7.8 billion. Kinder Morgan also confirmed its announced plans to invest slightly less than $3.1 billion in growth projects and joint ventures this year, and it expects to close the year with a net debt-to-EBITDA ratio of approximately 4.6 to 1.
For the fourth quarter, analysts are looking for EPS of $0.27on revenues of $3.67 billion. For the full year, estimates call for $1.00 in EPS and $13.88 billion in revenues.
Shares closed down about 0.8% Wednesday at $20.02 and traded down slightly at $20.00 in Thursday’s premarket session. Kinder Morgan’s dividend yield of 4.96% is holding up both its share price and its consensus price target of $22.29.
Kinder Morgan shares have added about 27% so far this year. But all the good news has been priced in since March. The stock trades more than 12 million shares a day with institutions holding 65% of shares outstanding and just over 75% of the total float. Short sellers hold less than 2% of the company’s float of 1.94 billion shares.