01—Abstract
Summary
Summary of the 8-K filed October 16, 2024. Cited figures are marked; the original filing is the authoritative source.
Kinder Morgan (KMI) reported preliminary third-quarter 2024 results on October 16, 2024, with GAAP EPS of $0.28a (up 17% year over year) but Adjusted EPS flat at $0.25 and DCF per share flat at $0.49.
Net income attributable to KMI rose to $625 millionb from $532 million, and Adjusted EBITDA grew 2% to $1,880 million. Revenue declined to $3,699 million from $3,907 million, largely because of lower commodity prices in the cost-of-sales line, while operating and maintenance costs rose. The board declared a quarterly dividend of $0.2875 per share ($1.15 annualized), a 2% increase, payable November 15, 2024.
Free cash flow after capital expenditures was $592 millionc, and cash flow from operations was $1.25 billion. Management lowered its full-year 2024 outlook modestly. Adjusted EBITDA is now expected to be about 2% below budget and Adjusted EPS about 4% below budget, mainly due to lower-than-budgeted commodity prices and start-up delays at renewable natural gas (RNG) facilities.
Even so, management still expects full-year Adjusted EBITDA to rise about 5%d and Adjusted EPS about 9% versus 2023. Year-end leverage is now guided to 4.0x Net Debt-to-Adjusted EBITDA, versus the 3.9x budget, and the company reported 4.1x at September 30, 2024. Growth remains anchored in natural gas infrastructure.
The company reached a final investment decision on a roughly $455 million Gulf Coast Express expansion (about $161 million KMI share), with in-service expected mid-2026. Project backlog was $5.1 billion, and the company cited a growing opportunity set of more than 5 Bcf/d of new gas demand from power generation, data centers, and industrial re-shoring. Investors should note that the most important metrics here are non-GAAP, and the headline EPS growth reflects GAAP items rather than underlying operating momentum.
02—Key points
Key Highlights
- GAAP EPS of $0.28 rose 17% year over year, while Adjusted EPS of $0.25 and DCF per share of $0.49 were flat versus Q3 2023.
- Adjusted EBITDA increased 2% to $1,880 million; net income attributable to KMI rose to $625 million from $532 million.
- Quarterly dividend declared at $0.2875 per share ($1.15 annualized), a 2% increase, payable November 15, 2024 to holders of record on October 31, 2024.
- 2024 guidance trimmed: Adjusted EBITDA about 2% below budget and Adjusted EPS about 4% below budget, but still up 5% and 9%, respectively, versus 2023.
- Year-end 2024 Net Debt-to-Adjusted EBITDA guided to 4.0x (versus 3.9x budget); 4.1x reported at September 30, 2024.
- Quarterly free cash flow of $592 million after capex; cash flow from operations of $1,249 million. Dividends paid of $643 million left FCF after dividends at negative $51 million for the quarter.
- Project backlog of $5.1 billion, with a Gulf Coast Express expansion (FID reached) and a NGPL Gulf Coast storage expansion (about 10 Bcf) under development.
03—Questions
Frequently Asked Questions
Why did GAAP EPS grow 17% while Adjusted EPS was flat?
The GAAP increase is driven by Certain Items, which are non-cash or non-recurring adjustments. In Q3 2024 these were a net benefit of $68 million (including a $49 million income tax benefit and a $20 million gain on derivative fair value changes), compared with a $30 million charge in Q3 2023. Excluding these items, Adjusted Net Income was $557 million, slightly below $562 million a year earlier, so underlying earnings were essentially flat.
Is the dividend safe, and how well is it covered?
The dividend is $1.15 per share annualized, and management expects to declare $1.15 for 2024. Q3 DCF was $1,096 million (DCF per share $0.49), comfortably above the $643 million of dividends paid in the quarter, a coverage ratio of roughly 1.7x. However, FCF after dividends was negative $51 million in Q3 because of growth capital spending, and nine-month FCF after dividends was $353 million. Coverage on a DCF basis appears solid, but the company funds growth partly with debt.
Why is 2024 guidance below budget, and what is the impact?
Management attributes the shortfall to lower-than-budgeted commodity prices and start-up delays at RNG facilities, partially offset by stronger natural gas transmission and storage contributions. Adjusted EBITDA is now expected to be about 2% below budget and Adjusted EPS about 4% below. The company still expects growth of about 5% in Adjusted EBITDA and 9% in Adjusted EPS versus 2023, so the revision is modest.
What major growth projects support future earnings?
The Gulf Coast Express expansion (about $455 million total, $161 million KMI share) reached FID and is expected in service in mid-2026. The Evangeline Pass project (about $670 million, delivering approximately 2 Bcf/d to Plaquemines LNG) is due July 1, 2025. The SSE4 project (about $3 billion, roughly $1.7 billion KMI share) is targeted for late 2028. Backlog stood at $5.1 billion, and management sees more than 5 Bcf/d of potential new gas demand from power generation, data centers, and industrial re-shoring.
How strong is the balance sheet and what are the risks?
Net debt was $31.7 billion, and the Net Debt-to-Adjusted EBITDA ratio of 4.1x is above the company's historical target range, though management guides to 4.0x by year-end. Total debt fell in the quarter as short-term debt declined from $4.0 billion to $2.0 billion, partly refinanced with long-term notes. Key risks include commodity price exposure (particularly in the CO2 segment, where crude volumes fell), delays in RNG start-ups, and the forward-looking risks disclosed in the company's SEC filings.
04—Continue