Kinder Morgan: EPS Rises, Revenue Falls

Kinder Morgan (NYSE:KMI), a leader in energy infrastructure, reported its fourth-quarter 2024 results on Jan. 22. Its adjusted earnings per share (EPS) of $0.32 fell short of the analysts' consensus estimate of $0.34, while revenue of $3.987 billion missed the forecast figure of $4.175 billion. However, it exhibited robust year-over-year growth of 14% in adjusted EPS and a 12.3% increase in net income. Overall, the quarter featured solid growth, but highlighted the company's challenges in meeting the market's expectations.

Source: Analysts' estimates for the quarter provided by FactSet.

Company Overview and Business Highlights

Kinder Morgan operates one of North America's largest networks of pipelines and terminals. It transports and stores natural gas, refined petroleum products, crude oil, carbon dioxide, and more. Its growth strategy involves buying and constructing new midstream assets, and boosting the utilization of its vast energy infrastructure in service of meeting the North American energy industry's needs. Recent highlights include significant new pipeline projects such as the Trident Intrastate, and the strategic acquisition of Outrigger Energy II’s systems in a deal that was valued at $640 million.

The company's business is built around high-value, fee-based revenue contracts. Its success pivots on landing long-term contracts and strategic asset placement in growth regions.

Quarterly Performance and Developments

Kinder Morgan's Q4 performance varied across its core business segments. The natural gas pipelines segment observed higher contributions from acquired assets in Texas, yet saw a 7% decline in gathering volumes due to lower commodity prices. The products pipelines unit benefitted from higher rates, resulting in a 2% increase in refined products volumes. The terminals segment reported earnings growth driven by increased Jones Act tanker rates. Conversely, the carbon dioxide business faced setbacks due to reduced production volumes and prior asset divestments.

On the asset development front, the company showcased a robust project pipeline. It announced the $1.7 billion Trident Intrastate Pipeline Project, which is expected to enhance its capacity by early 2027. Additionally, Kinder Morgan's project backlog swelled to $8.1 billion, focusing mainly on natural gas initiatives. This suggests management anticipates a strong growth trajectory.

Kinder Morgan maintained a stable financial situation, with a net debt-to-adjusted EBITDA ratio of 4. However, its long-term debt sits at approximately $30 billion. Notable financial management moves during the quarter involved funding major projects internally and adjusting dividends slightly upward.

From a contractual standpoint, the company secured new agreements to underpin demand for major projects like the South System Expansion 4. These contracts aim to provide steady revenue streams even during volatile market conditions.

Looking Ahead

For 2025, Kinder Morgan projects adjusted EPS will grow by 10% to $1.27, with its project backlog laying the groundwork for future gains. Management anticipates a modest 2% dividend increase, in line with its conservative yet positive market outlook.

Investors are advised to watch how successfully Kinder Morgan expands its infrastructure density and utilization, manages its substantial debt load, and secures new long-term contracts. The company's guidance suggests it expects no significant changes in financial strategy, with an emphasis on careful capital deployment and project execution.

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JesterAI is a Foolish AI, based on a variety of Large Language Models (LLMs) and proprietary Motley Fool systems. All articles published by JesterAI are reviewed by our editorial team, and The Motley Fool takes ultimate responsibility for the content of this article. JesterAI cannot own stocks and so it has no positions in any stocks mentioned. The Motley Fool has positions in and recommends Kinder Morgan. The Motley Fool has a disclosure policy.