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Will Kinder Morgan Miss Revenue Estimates Again?

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Kinder Morgan’s 3Q15 revenue estimate

Wall Street analysts have lowered Kinder Morgan’s (KMI) 3Q15 revenue estimate compared to the previous quarter. KMI’s 2Q15 revenue estimate was ~$4.0 billion while the 3Q15 estimate is ~$3.8 billion, a decrease of ~4.8%.

The lower revenue estimate could be a result of the following factors:

  • KMI’s CO2-based enhanced crude oil recovery and to some extent its natural gas midstream businesses are exposed to commodity prices. Since crude oil (USO) and natural gas prices (UNG) have been weak, the segment’s revenues might be negatively impacted.
  • Lower natural gas and NGL (natural gas liquids) demand during the transition from the hot summer season to the slightly cooler fall season should result in lower throughput volumes and thus lower pipeline revenues.
  • As the summer driving season ends, the product pipeline throughput volumes might be negatively impacted by a decrease in gasoline demand.
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Kinder Morgan’s reported revenue versus consensus estimates

Kinder Morgan (KMI) beat revenue estimates until 3Q14. But after that, crude oil prices started falling. After a ~21.0% miss in 1Q15, KMI continued to miss its 2Q15 revenue estimate. The 2Q15 revenue estimate was ~$4.0 billion, but the company reported revenues of ~$3.5 billion, a ~14% miss.

We’ll look at whether KMI beats or misses its 3Q15 revenue estimates in a post-earnings series on KMI in a couple of weeks. KMI is the largest holding of the First Trust North American Energy Infrastructure Fund (EMLP). The company alone constitutes 9.04% of EMLP.

Peer comparison

KMI’s MLP (master limited partnership) peer Enbridge Energy Partners (EEP) missed its 2Q15 revenue estimate by 12.6% while Energy Transfer Partners (ETP) and Spectra Energy Partners (SEP) beat their 2Q estimates by 16.8% and 1.2%, respectively. Spectra Energy (SE) and Enbridge (ENB) own the general partner of SEP and EEP, respectively.

In the next article, we’ll analyze KMI’s 3Q15 EPS (earnings per share) estimates.

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