Kinder Morgan Earnings: Is the Energy Giant Back on Track?

On Wednesday, Kinder Morgan (NYSE: KMI  ) will release its quarterly report, and investors hope that the general partner of Kinder Morgan Energy Partners (NYSE: KMP  ) and El Paso Pipeline Partners (NYSE: EPB  ) can keep taking advantage of the boom in U.S. oil and gas production. Despite some fears among investors that Kinder Morgan and the midstream industry more generally have already seen their best days, the company has seen few signs of slowing interest in energy opportunities across the nation.


Source: Kinder Morgan

When most investors think about energy, their attention first goes to the companies that find and extract oil and gas from the ground. Yet once that happens, there are several other steps that have to happen before you can fill up your gas tank or heat your home. With tens of thousands of miles of pipelines helping to link major production sites to the areas where energy products are refined and processed, Kinder Morgan is a key part of the U.S. energy industry. Let's take an early look at what's been happening with Kinder Morgan over the past quarter and what we're likely to see in its report.

Stats on Kinder Morgan

Analyst EPS Estimate

$0.29

Change From Year-Ago EPS

7.4%

Revenue Estimate

$3.78 billion

Change From Year-Ago Revenue

11.8%

Earnings Beats in Past 4 Quarters

0

Source: Yahoo! Finance

What's next for Kinder Morgan earnings?
In recent months, investors have marked down their views on Kinder Morgan earnings, cutting their second-quarter estimates by a nickel per share and their full-year projections by more than 5%. The stock, though, has risen about 10% since early April.

Kinder Morgan's first-quarter results were solid, with positive contributions from both Kinder Morgan Energy Partners and El Paso Pipeline Partners helping to drive the general partner's profits. On the Kinder Morgan side, a 20% rise in adjusted net income led to the master limited partnership boosting its quarterly distribution by 6%, with natural-gas pipelines and terminal operations leading the way higher. Meanwhile, El Paso produced more modest growth, but it was still able to support its previously raised payout, which was about 5% higher than previous-year levels.

Source: Kinder Morgan

Yet Kinder Morgan hasn't reined in its innovative plans for future investment. After buying a couple of oil-tanker companies last year, Kinder Morgan recently said that it would build a new tanker specifically designed to carry liquefied natural gas. With several projects contemplating LNG export from the gas-rich U.S. to other parts of the world, including El Paso's involvement in plans to add LNG-export capabilities at Georgia's Elba Island, Kinder Morgan wants to ensure that its gas-transport business isn't limited to onshore pipelines.

One bone of contention among critics has involved Kinder Morgan's carbon-dioxide business. Oil recovery methods involving carbon-dioxide injection have been successful in squeezing even more energy from many of the oldest production areas in the country, and because of the huge margins involved, the carbon-dioxide segment has been Kinder Morgan's most profitable. The controversy stems from skeptics believing that the eventual decline in CO2-based production methods is unavoidable. Yet for years, Kinder Morgan has successfully delayed predicted declines in that part of its business, and it now expects to take steps to expand its production further.

In the Kinder Morgan earnings report, watch to see how well each of the company's segments perform. With so much potential in the energy business, Kinder Morgan has continually taken advantage of new opportunities and rewarded investors with generous income distributions. As long as the energy boom lasts, Kinder Morgan will be in a position to deliver its bounty across the nation and even around the world.

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