Kinder-Morgan missed estimates and lowered guidance
Kinder-Morgan reported earnings of $.22 per share, missing analyst estimates of $.24. This is a year-over year decline from 2019, but adjusted earnings showed a 5% year-over-year improvement. Kinder Morgan also lowered its full-year 2019 EBITDA guidance by about 3% due to project delays, though this may already be priced in. They noted that EBITDA was "slightly" below budget on their last quarterly report.
Kinder Morgan's forecast looks relatively bright. The company expects to pay for all its projects in cash, which means investors don't need to worry about new debts or share offerings diluting their investment. It's got plans to sell a couple projects to reduce debt by about a billion dollars. It's made good progress on bringing projects to completion, reducing its backlog by $1.6 billion. It expects its backlog of projects to generate EBITDA worth 6 times their cost.
However, I question the accuracy of the company's forecasting. "KMI’s budgeted expectations assume average annual prices for West Texas Intermediate (WTI) crude oil of $60.00 per barrel and Henry Hub natural gas of $3.15 per million British Thermal Units (MMBtu)." Those prices are well above both the current market price and the EIA's 2020 price forecast, which means that if prices remain weak then Kinder Morgan won't realize nearly as much revenue as it has budgeted for.
Kinder Morgan's earnings are growing steadily, and the $1 per year dividend may be attractive to long-term investors. That's an approximately 5% annual return, which is a great dividend return for an investment in a growing company. However, with a P/E over 20, poor analyst ratings, and sketchy forecasting, Kinder Morgan looks overvalued to me. Given the weakness of these earnings, I'd want to see a significant pullback before entering this long.
Kinder Morgan's forecast looks relatively bright. The company expects to pay for all its projects in cash, which means investors don't need to worry about new debts or share offerings diluting their investment. It's got plans to sell a couple projects to reduce debt by about a billion dollars. It's made good progress on bringing projects to completion, reducing its backlog by $1.6 billion. It expects its backlog of projects to generate EBITDA worth 6 times their cost.
However, I question the accuracy of the company's forecasting. "KMI’s budgeted expectations assume average annual prices for West Texas Intermediate (WTI) crude oil of $60.00 per barrel and Henry Hub natural gas of $3.15 per million British Thermal Units (MMBtu)." Those prices are well above both the current market price and the EIA's 2020 price forecast, which means that if prices remain weak then Kinder Morgan won't realize nearly as much revenue as it has budgeted for.
Kinder Morgan's earnings are growing steadily, and the $1 per year dividend may be attractive to long-term investors. That's an approximately 5% annual return, which is a great dividend return for an investment in a growing company. However, with a P/E over 20, poor analyst ratings, and sketchy forecasting, Kinder Morgan looks overvalued to me. Given the weakness of these earnings, I'd want to see a significant pullback before entering this long.