After tumbling nearly 5% Wednesday, shares of Kinder Morgan KMI are rebounding strongly today, up about 18.5% in early morning trading. Despite announcing weak revenues in its latest earnings report, Kinder Morgan is being driven by renewed internal optimism.
It seems like most of today’s action can be linked to news from yesterday. The company posted Q4 earnings of 27 cents, which beat our Zacks Consensus Estimate of 17 cents. However, the company reported revenue figures of $3.636 billion, missing our estimate of $3.808 billion, and declining -8% year-over-year.
The latest earnings report was the final piece of what was a rough 2015 for Kinder Morgan, a year in which the company’s stock fell 65%. On paper, this makes sense. Falling commodities prices damage Kinder Morgan’s CO2 business, and with no end in sight for cheap fuel, it’s logical that the market would we weary of the company right now.
Nevertheless, today’s rebound is in line with the company’s own sentiment. After the closing bell, Kinder Morgan held its earnings conference call, and company President and COO Steve Kean reassured investors that Kinder Morgan’s primary business is in good shape.
“Commodity prices do directly affect us in the CO2 business and a subpart of our midstream business. We also suffered in our bulk terminals business in coal and steel and especially from the bankruptcy of two of our important coal customers. Those things absolutely pulled back our performance without a doubt,” Kean said.
“But it is important to remember, particularly in times like these, that our primary business is the transportation and storage of energy commodities for a fee and that the commodities that we handle the most are natural gas and refined products.”
Additionally, we saw a big insider buy on the dip. Fayez Sarofim, an original investor and director of Kinder Morgan, purchased 15,940 shares of the company on January 19. Sarofim now owns over 37 million shares of Kinder Morgan.
It’s impossible to say exactly what will happen with commodities prices in the near future, but it should be reassuring to investors if Kinder Morgan can maintain a balance in this tumultuous market. Currently, KMI has a Zacks Rank #3 (Hold).
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