Kinder Morgan Inc. KMI reported third-quarter 2015 earnings of 19 cents a share from continuing operations. The bottom line beat the Zacks Consensus Estimate of 18 cents but decreased from 32 cents reported a year ago.
Total revenue for the quarter decreased 13.6% year over year to $3,707 million. The reported figure also came in below the Zacks Consensus Estimate of $3,776 million.
Dividend
Kinder Morgan raised its quarterly dividend by 16% to 51 cents a share ($2.04 a share annualized) from 44 cents ($1.76 a share annualized) paid in the third quarter of 2014. The dividend is payable on Nov 13, 2015, to shareholders of record as of Nov 2.
Operational Highlights
Operating expenses in the quarter were $1,718 million. This represents a 22% decrease from $2,199 million spent in the third quarter of 2014.
Operating income came in at $721 million. This marks a 46% decline from the comparable quarter a year ago. Operating margin was approximately 19.4% compared with 31% in the year-ago quarter. Third-quarter net income was $186 million against $329 million in the comparable quarter last year.
Financials
The company reported third-quarter distributable cash flow of $1,129 million compared with $435 million in the year-earlier quarter. The improvement is owing to Kinder Morgan’s merger transactions that were completed in Nov 2014.
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 takeover simplified the structure of the Kinder Morgan group of companies, thereby benefiting all shareholders and unitholders.
As of Sep 30, 2015, Kinder Morgan reported $179 million in cash and cash equivalents. The company’s long-term debt amounted to $39,675 million at quarter end.
Outlook
Kinder Morgan is on its way to meet the dividend target of $2.00 per share for 2015. This represents an increase of approximately 15% over the dividend of $1.74 declared in 2014.
On top of that, the company is anticipating the increase of its 2016 dividend by 6–10% year over year.
Our Take
Currently, Kinder Morgan carries a Zacks Rank #4 (Sell). Some better-ranked players in the energy sector are NuStar Energy LP NS, Exterran Partners LP EXLP and Natural Gas Services Group Inc. NGS. All the three stocks sport a Zacks Rank #1 (Strong Buy).
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