Midstream energy assets operator, Kinder Morgan, Inc. (KMI) is expected to report fourth-quarter 2014 earnings on Jan 21, after the closing bell.
In the last quarter, the company’s earnings of 32 cents per share missed the Zacks Consensus Estimate of 33 cents. However, the quarter's results increased 18.5% from the year-ago earnings of 27 cents per share. Let’s see how things are shaping up prior to the announcement.
Earnings Whispers
Our proven model shows that Kinder Morgan is likely to beat earnings because it has the right combination of key factors.
Zacks ESP: Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is +2.78%. This is a meaningful and leading indicator of a likely positive earnings surprise for this company.
Zacks Rank: Kinder Morgan carries a Zacks Rank #3 (Hold). The stocks with Zacks Rank #1, 2 or 3 have a significantly higher chance of beating earnings. The Sell-rated stocks (#4 and 5) should never be considered going into an earnings announcement. The combination of Kinder Morgan’s Zacks Rank #3 and +2.78% ESP make us confident of an earnings beat in the upcoming release.
What Will Drive the Better-than-Expected Earnings?
Kinder Morgan, a leading North American midstream energy company, is expected to capitalize on attractive investment opportunities in the near term, particularly in the Eagle Ford and Haynesville shale plays. As the company’s primary operations are midstream, it is somewhat shielded from the negative effects of commodity price declines compared to exploration and production firms. Moreover, the need for transportation and storage facilities continue to be in demand considering the substantial rise in domestic production.
The company also boasts a steady rise in dividends. Kinder Morgan increased its quarterly dividend by 7% to 44 cents a share in the third quarter of 2014. Management has set a dividend target of $1.72 per share for 2014, up 8% year over year. Moreover, Kinder Morgan expects to achieve annual dividend growth of 16% through 2015.
On Nov 27, 2014, the company announced the acquisition of its three subsidiaries – Kinder Morgan Energy Partners, L.P., Kinder Morgan Management, LLC and El Paso Pipeline Partners, L.P. The combined entity represents the largest energy infrastructure company in North America and the third-largest energy company globally. Further, the acquisition simplified the structure of the Kinder Morgan group of companies, benefiting all shareholders and unitholders.
Additionally, the company will have a leading position in each of its business segments, and operate in the swiftly growing North American energy infrastructure sector. These factors will benefit the shareholders and increase profitability of the company.
Other Stocks to Consider
Here are some other companies from the energy sector that, according to our model, have the right combination of elements to post an earnings beat this quarter:
Spectra Energy Partners LP (SEP) has Earnings ESP of +7.25% and a Zacks Rank #1 (Strong Buy).
Enbridge Energy Management LLC (EEQ) has Earnings ESP of +19.36% and a Zacks Rank #3.
Phillips 66 (PSX) has Earnings ESP of +3.76% and a Zacks Rank #3.
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