Despite a challenging macroeconomic backdrop, midstream companies are positioned well going into earnings. Kinder Morgan Inc (KMI) will be the first midstream company to report, releasing its third-quarter earnings on Wednesday after the closing bell.
KMI reported adjusted earnings per share of 27 cents during the second quarter, which was in line with analysts’ expectations. The Zacks Consensus Estimate for third-quarter earnings per share of 29 cents has had no revisions over the past seven days. The estimated figure suggests a 31.8% improvement from the prior-year reported number, according to Zacks.
The consensus estimate for third-quarter revenues of $4.5 billion amounts to an 18.3% increase from the year-ago quarter. In the trailing four quarters, KMI’s earnings beat the Zacks Consensus Estimate twice, met once, and missed once.
KMI is a top 10 holding in the Alerian Energy Infrastructure ETF (ENFR), weighted at 5.3% as of October 17, according to ALPS. ENFR tracks the Alerian Midstream Energy Select Index (AMEI), a composite of North American energy infrastructure companies. Investors can also access AMEI with the ALPS Alerian Energy Infrastructure Portfolio (ALEFX), which delivers exposure in a VIT wrapper
72.91% of AMEI by weighting has a buyback authorization in place as of 9/30, according to ALPS. KMI was active with buybacks earlier this year, repurchasing approximately 16 million shares of its common stock at an average price of $17.09 per share year to date through July 20, the company said during its second-quarter earnings call.
While crude oil and natural gas prices have been more volatile in recent months, midstream differs from other segments of energy in the way that it earns a profit, providing its services for a fee, which makes it less sensitive to fluctuations in oil and natural gas prices.
Energy infrastructure companies are those that perform the shipping and handling functions of the energy industry. Examples include companies that operate pipelines, facilities that process natural gas and natural gas liquids, and those that operate storage and export terminals.
For more news, information, and strategy, visit the Energy Infrastructure Channel.
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