Kinder Morgan (KMI) has been one of the most popular stocks among Zacks.com visitors recently, so it may be wise to take a look at some factors that could affect the stock’s near-term performance.
Shares of this oil and natural gas pipeline and storage company have risen +1.4% over the past month versus a +4.1% gain for the Zacks S&P 500 Composite Index. The Zacks Oil & Gas – Production and Pipelines industry, which Kinder Morgan belongs to, has gained 1% in that time period. The big question here is, where is the stock headed in the near term?
Media announcements or rumors of significant changes in a company’s business outlook will usually make the stock “trend” and cause immediate price movements, but there are always some fundamental facts that ultimately drive the buy-and-hold decision.
Earnings forecast revision
At Zacks, we prioritize evaluating the changes in a company’s earnings estimates over other factors because we believe the fair value of a stock is determined by the present value of its future earnings stream.
Our analysis is essentially based on how sell-side analysts covering the stock are revising their earnings forecasts in light of the latest business trends. When a company’s earnings forecast goes up, the fair value of its stock also goes up. And if a stock’s fair value is higher than its current market price, investors are more inclined to buy the stock, resulting in an increase in its share price. For this reason, empirical research shows a strong correlation between trends in earnings forecast revisions and short-term stock price movements.
Kinder Morgan is expected to post earnings of $0.25 per share for the current quarter, which would represent a +4.2% change from the year-ago period. The Zacks Consensus Estimate has not changed within the past 30 days.
The consensus earnings estimate for the current fiscal year is $1.18, indicating a change of +10.3% year over year. This estimate has not changed in the past 30 days.
Looking at the next fiscal year, the consensus earnings estimate is $1.22, up 2.9% from what Kinder Morgan was expected to report a year ago, with estimates unchanged over the past month.
The Zacks Rank, our proprietary stock rating tool that has an impressive outside-audited track record, effectively harnesses the power of earnings estimate revisions and is a more reliable indicator of near-term stock price movements. The magnitude of the recent change in the consensus estimate, along with three other factors related to earnings expectations, has earned Kinder Morgan a Zacks Rank #3 (Hold).
The chart below shows the evolution of the company’s consensus EPS estimates over the next 12 months.
12 Month EPS
Revenue Growth Forecast
A company’s earnings growth is arguably the best indicator of a company’s financial health, but nothing happens if the company can’t grow earnings. It’s nearly impossible for a company to grow its earnings without growing its revenue over the long term. Therefore, knowing a company’s earnings growth potential is very important.
For Kinder Morgan, the consensus revenue estimate for the current quarter is $3.88 billion, indicating a change of +10.9% year-over-year. For the current and next fiscal years, estimates of $15.84 billion and $16.49 billion indicate changes of +3.3% and +4.1%, respectively.
Last reported results and surprise history
Kinder Morgan reported revenue of $3.84 billion for the most recent quarter, down 1.2% from the same period last year. EPS was $0.34 for the quarter, compared to $0.30 in the same period last year.
Compared to the Zacks Consensus Estimate of $4.41 billion, reported revenues represented a surprise of -12.83%. EPS surprise was +3.03%.
Over the last four quarters, Kinder Morgan has surpassed consensus EPS estimates two times, and the company has surpassed consensus estimates for revenue just once during that period.
evaluation
No investment decision can be made efficiently without taking into account stock valuation. Whether a stock’s current price properly reflects the intrinsic value of its business and the company’s growth prospects is a key factor in determining future stock price movements.
Comparing the current value of a company’s valuation multiples such as Price to Earnings (P/E), Price to Sales (P/S) and Price to Cash Flow (P/CF) with the company’s historical values ​​helps in determining whether the stock is fairly valued, overvalued or undervalued, while comparing a company with its peers on the basis of these parameters gives a good sense of the fairness of the stock’s valuation.
The Zacks Value Style Score, a part of the Zacks Style Scores system, evaluates both traditional and non-traditional metrics, categorizes stocks into five groupings from A to F (A is better than B, B is better than C, etc.) to help identify whether stocks are overvalued, fairly valued or temporarily undervalued.
Kinder Morgan is rated a C in this regard, indicating that it is trading in line with its peers. Click here to see the values ​​of the valuation metrics that drove this rating.
Conclusion
The facts discussed here, and many other information on Zacks.com, may help you decide whether it’s worth paying attention to the market buzz around Kinder Morgan, although the company’s Zacks Rank #3 suggests it may be capable of performing in line with the broader market in the near term.
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Kinder Morgan Inc. (KMI) : Free Stock Analysis Report
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