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Kinder Morgan 2Q15

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World Pipelines,

Kinder Morgan missed its revenue estimates for the third consecutive quarter. The 2Q15 consensus estimate was US$4.029 billion, while the firm’s actual revenue came in at US$3.463 billion, a miss of 14.1%.

Until 4Q14 – the period before the effects of the now yearlong rout in energy prices began to be felt – Kinder Morgan beat revenue estimates for nine consecutive quarters. Kinder Morgan’s 2Q15 revenue miss can be attributed to the worse-than-expected performance in its Natural Gas Pipeline and CO2 segments. These two segments have significant exposure to commodity prices compared to its other segments.

Adjusted EPS versus consensus estimates

Kinder Morgan missed its EPS (earnings per share) estimates for 2Q15 after meeting them in 1Q15. For 2Q15, the consensus estimate was US$0.188, while adjusted EPS came in at US$0.1750 – a 6.9% miss.

Stock price reaction

KMI stock has fallen by 7.3% since the earnings announcement on 15 July 2015. However, the revenue and EPS misses are not likely to be the sole reasons for Kinder Morgan’s fall when one considers that the company has grown its dividends and distributable cash flow even during the energy-price slump.

The company has returned -17.4% since the beginning of this year, and its peers – Enterprise Product Partners (EPD), Williams Partners (WPZ), Enbridge Energy Partners (EEP), and Energy Transfer Partners (ETP) – have returned -24.17%, 0.29%, -24.26%, and -22.71% year-to-date, respectively. This indicates a general weakness in the midstream energy sector.

Together, EPD, WPZ, EEP, and ETP account for 28.99% of the Alerian MLP ETF (AMLP). KMI alone constitutes 4.36% of the Energy Select Sector SPDR Fund (XLE). 

 Edited from press release by Stephanie Roker

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