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Why Kinder Morgan’s 2Q15 Earnings per Share Estimate Is Low Again

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2Q15 earnings per share estimate

Kinder Morgan (KMI) beat analysts’ EPS (earnings per share) estimates in 1Q15. But Wall Street analysts lowered their 2Q15 EPS estimates to ~$0.191 compared to the ~$0.216 they estimated in 1Q15. That’s a decrease of ~11.6%.

The 2Q15 EPS estimate is the lowest of the last 12 quarters. The lower estimate could be attributable to the following:

  • KMI’s CO2-based enhanced crude oil recovery and natural gas midstream businesses are exposed to commodity prices. Since prices haven’t recovered substantially, KMI’s earnings might be negatively impacted.
  • Lower earnings during the second and third quarters could be due to lower demands for natural gas and NGLs (natural gas liquids).
  • Interest costs have increased due to KMI’s February 2015 Hiland Partners acquisition.
  • G&A (general and administrative) expenses have increased as a result of the Hiland acquisition. KMI expects G&A expenses to be 4% above the 2015 budget.
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Adjusted earnings versus consensus estimates

The 1Q15 EPS estimate for KMI was ~$0.216, while the adjusted EPS was ~$0.232, a ~7.6% beat. We’ll have to wait for the 2Q15 earnings release to see whether KMI beats or misses its 2Q15 EPS estimates. We’ll cover this in our post-earnings series for KMI next month.

Peer comparison

KMI’s C corporation peer Spectra Energy Corp (SE) missed its 1Q15 EPS estimate by 2.73%. The Williams Companies (WMB) met its 1Q15 EPS estimates. WMB’s adjusted EPS was ~11.3% greater than consensus estimates. KMI’s MLP peers Sunoco Logistics Partners (SXL), Energy Transfer Partners (ETP), and Enterprise Products Partners (EPD) missed their 1Q15 EPS estimates by 133.7%, 66.9%, and 0.7%, respectively. KMI, WMB, and SE together make up 9.4% of the Energy Select Sector SPDR Fund (XLE).

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