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Highlights from Kinder Morgan’s Fourth-Quarter Earnings

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Nov. 20 2020, Updated 3:36 p.m. ET

Earnings and revenues

Kinder Morgan (KMI) reported its fourth-quarter earnings on January 16 after the markets closed. Kinder Morgan’s adjusted EPS grew ~19% YoY (year-over-year) in the fourth quarter. The adjusted EPS missed the consensus estimates for the quarter. For fiscal 2018, Kinder Morgan’s adjusted EPS grew ~35% compared to 2017. Kinder Morgan marginally missed its revenue estimates for the fourth quarter. The company’s fourth-quarter revenues grew 4% YoY.

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Targeted leverage metrics

Kinder Morgan’s adjusted net debt-to-adjusted EBITDA ratio was 4.5x at the end of 2018. “Consistent with that achievement, Moody’s and Standard & Poor’s have upgraded our credit ratings, and we are on positive outlook for an upgrade by Fitch Ratings Inc. later in the year,” noted Steve Kean, Kinder Morgan’s CEO.

Kinder Morgan expects to end 2019 with a net debt-to-adjusted EBITDA of 4.5x. The above graph shows the improvement in Kinder Morgan’s net debt-to-adjusted EBITDA ratio over the last four years.

Strong natural gas demand

Kinder Morgan’s earnings growth in the fourth quarter and fiscal 2018 was supported by the strong growth in natural gas demand. The US natural gas demand rose 11% to 90 Bcf/d (billion cubic feet per day) in 2018 from 81 Bcf/d in 2017. The expected natural gas demand growth should benefit Kinder Morgan in the long term.

Henry Hub natural gas prices averaged $3.8 per MMBtu (million British thermal units) in the fourth quarter—compared to an average of $2.9 per MMBtu in the third quarter and the fourth quarter of 2017.

Kinder Morgan stock fell ~1.6% in after-hours trading on January 16. Enterprise Products Partners (EPD) and Magellan Midstream Partners (MMP) are scheduled to report their fourth-quarter results on January 31. Plains All American Pipeline (PAA) is scheduled to report its earnings on February 5. ONEOK (OKE) is expected to report its results in the last week of February.

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