Kinder Morgan Inc. (KMI) reported third-quarter 2014 earnings of 32 cents a share from continuing operations, failing to meet the Zacks Consensus Estimate of 33 cents. However, the earnings improved from 27 cents earned a year ago.
Total revenue for the quarter increased 14.2% year over year to $4,291.0 million. The reported figure surpassed our expectation of $3,995.0 million.
Dividend
Kinder Morgan boosted its quarterly dividend to 44 cents a share ($1.76 per share annualized), up 7% from 41 cents ($1.64 per share annualized) paid in the third quarter of 2013. The dividend is payable Nov 17, 2014, to shareholders of record as of Oct 31.
Operational Highlights
Total expenses in the quarter were $2,959.0 million, representing a 9.0% increase from $2,715.0 million spent in the third quarter of 2013.
Operating income came in at $1,332.0 million, representing 28.0% growth from the comparable quarter a year ago. Operating margin was 31.0% compared with 27.7% in the year-ago quarter.
Financials
Cash available for dividend payments was $435.0 million in the reported quarter, reflecting an increase of 2.6% from $424.0 million in the comparable quarter last year. As of Sep 30, 2014 Kinder Morgan reported $56 million in cash and cash equivalents, while long-term debt was $8,086 million.
Our Take
Kinder Morgan is the largest midstream and the fourth largest energy company in North America. It owns an interest in or operates approximately 80,000 miles of pipelines and 180 terminals.
The company’s growth curve will be driven by its planned purchase of all the outstanding equity securities of Kinder Morgan Energy Partners, L.P. (KMP), Kinder Morgan Management, LLC (KMR) and El Paso Pipeline Partners, L.P (EPB). The transaction is expected to close by the end of 2014.
The acquisition will simplify the structure of the Kinder Morgan group of companies, benefiting all shareholders and unitholders. Kinder Morgan is projected to return a dividend of $2.00 in 2015. The combined entity, once operational, will represent the largest energy infrastructure company in North America and the third-largest energy company overall. The new company is estimated to have an enterprise value of about $140 billion.
Kinder Morgan currently carries a Zacks Rank #4 (Sell).
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