Kinder Morgan, Inc., reported after the market closed on January 20, 2021 it earned $0.27 per diluted share in the quarter that ended on December 31, 2020, no change from earnings of $0.27 in the same 3 months of the previous year. These figures are the earnings determined in accordance with U.S. Generally Accepted Accounting Principles (GAAP).
Adjusted Earnings, a non-GAAP figure, did a little better, rising 4 percent to $0.27 per share from $0.26 one year earlier.
This post compares the quarterly Income Statement published by KMI to the predictions I made in the “Look Ahead” post I shared earlier.
First a little background about the company: Kinder Morgan owns and operates a sprawling network of pipelines and associated terminals for transporting oil, gas, carbon-dioxide, and other products. Already a large owner of pipelines, Kinder Morgan became gigantic when it acquired El Paso, Corp., in 2012. Shortly thereafter, Kinder Morgan executed a series of transactions, totalling $76 billion, that converted general and limited partnership interests of various Kinder Morgan and El Paso entities into one publicly traded company. About 40 percent of the natural gas consumed in the U.S. is now carried by Kinder Morgan pipelines. More recently, Kinder Morgan (and most other other energy firms) experienced declining profits and cash flows when actions taken worldwide to combat the COVID-19 pandemic reduced overall demand for energy products. Upstream producers that depend on high prices were hurt the most, but midstream firms such as Kinder Morgan also suffered. The company incurred impairment charges totaling $1.6 billion in 2020 when it recognized formally that lower energy prices had lowered the value of its assets.
Revenue in the December 2020 quarter totaled $3.1 billion, 7 percent less than last year's $3.4 billion. I had predicted Revenue of $3.2 billion, and the actual figure missed this by 3.2 percent.
The Gross Margin weakened from 56.6 percent of revenue to 55.3 percent, a sign that Kinder Morgan sold its output and services at less profitable prices relative to production costs. I had assumed the Gross Margin would be 57.0 percent, and the actual margin was less profitable.
Sales, General, and Administrative expenses rose from $236 million in the year-earlier quarter to $270 million. These expenses increased from 7.0 percent to 8.7 percent of quarterly revenue, which shows the company spent more per dollar of sales on other operational costs, such as marketing. I had expected SG&A to be 7.4 percent of revenue, a lower figure than the actual percentage.
Operating Income sank from $1.9 billion (boosted by a big gain on a divestiture) to $980 million. My estimate of $937 million was in the right ballpark.
Interest and other non-operating items totaled a net expense of $180 million, much better that last year’s $850 million expense because of higher earnings on equity investments. I had predicted a $230 million non-operating expense.
The effective income tax rate fell sharply from 42 percent to 22 percent, which had a positive, but expected, effect on Net Income.
Net Income attributable to KMI, at $607 million, was almost the same as in the year-earlier quarter. It beat my estimate of $537 million by 13 percent. EPS, as mentioned above, was steady at $0.27, and exceeded by estimate by $0.03.
In summary, Kinder Morgan’s revenue and operating margins decreased in the latest quarter, when compared to the year-ear period. But, non-operating income increased sharply and the income tax rate was down. Somehow, everything balanced out and the company’s earning per share was exactly the same as last year, and 13 percent more than I expected.
Please note that my organization of revenues, expenses, gains, and losses, which I use for all analyses, can and often does differ in material respects from company-used formats. The standardization facilitates cross-company comparisons.
#kindermorgan #kmi #gauges #gcfr #gcfr2 #lookahead #nac_financialanalysis
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