Kinder Morgan (NYSE: KMI, $18.16, down 84 cents) reported first 1Q16 results Wednesday. The firm posted earnings per share of $0.12 per share on revenues of $3.2 billion. In the same period a year ago Kinder Morgan posted EPS of $0.24 on revenues of $3.6 billion. This was a bit below consensus estimates of $0.19 per share on revenues of $3.75 billion.
Cash flow has remained remarkably steady despite slumping commodity prices. They reported cash flow of $1.23 billion for the first quarter of 2016, flat from last year's first quarter. Kinder Morgan will pay a dividend of 12 1/2 cents per share to shareholders of record on May 2nd. On an annualized basis the company’s dividend payment of $0.50 represents a yield of 2.75%.
The company also cut its capital expenditures from $3.3 billion to $2.9 billion, a second drop from its original spending plan of $4.2 billion for the year. The company also reduced its growth backlog from a prior total of $18.2 billion to $14.1 billion, driven primarily to the removal of the Northeast Energy Direct Market project and the Palmetto Pipeline project.
Executive chairman Richard Kinder had this to say about KMI:
“Given our tremendous amount of cash flow, we do not need to access the capital markets to fund growth projects in 2016. This cash flow in excess of our dividends insulates us from challenging capital markets and significantly enhances our credit profile. Moreover, we do not expect to need to access the capital markets to fund our growth projects for the foreseeable future beyond 2016.”
Capital expenditures are going lower, but the good news according to Richard Kinder, is that there will be no further dilution of the stock.
The weak market conditions are expected to continue to have a minor impact on Kinder Morgan's cash flow this year. Given its current outlook, it sees EBITDA now coming in roughly 3% below its $7.5 billion budget while distributable cash flow is expected to be roughly 4% below its $4.7 billion budget. The company still expects to generate more than enough cash flow to fund its current dividend and its capital budget, all the while still generating excess cash flow to reduce leverage and hit its year-end target.
BMR Take: We added the stock to our $17.76 in late February which is about where it is now, so we are content to sit back and collect dividends and keep our eye on the price of crude oil, looking for it to stabilize here in the 40s. If it heads back to $30, we will look to get out of the stock if it approaches $15.
Google (GOOG: $759, up $6 during the day, but down $45 to $715 in overnight trading) Alphabet's revenue rose to $20.25 billion from $17.25 billion, slightly below the $20.37 billion analyst consensus. Earnings per share came in at $7.50, and missed analysts' expectations of $7.97. However, foreign exchange rates shaved $762 million from the top line.
And listen to this: Google's advertising revenue increased 16% to $18 billion, rising 23% Y/Y. This is insanely good. The number of ads, or paid clicks, rose 29% the company said. Again – very strong if you ask us. Total income rose to $4.2 billion, or $6.02 per Class C stock, from $3.5 billion, or $5.10 per share.
BMR Take: We are not backing off on this one. The stock is ON SALE at $715. Will it go to $650-680 if the market heads to 17,000 or below? Probably yes. Can you stand the pain? Yes? No? If no, then get out now. But we remain big fans of this company, loaded with over $40 billion in cash. Hey – we accessed the google website five times while research this News Flash! We believe in the company and feel that if the market stays at 18,000 or higher, Google will come back slowly and surely to set new highs of $800+ by this time next year.
Microsoft (MSFT: $56, flat for the day, but down $3 to $53 in overnight trading) earned 62 cents, flat with the year-earlier quarter, on sales of $22.1 billion, up 2%, in the quarter ended March 31. Analysts expected 64 cents and $22.1 billion in sales (the same as what they reported.) Excluding the impact of foreign exchange rates, Microsoft’s sales would have risen 5%.
For the upcoming quarter, Microsoft expects sales of $22.1 billion, based on the midpoint of its guidance. That’s about the same as the year ago quarter, but $1 billion below the $23.0 billion modeled by Wall Street. Analysts expect 66 cents, up 10%.
BMR Take: This wasn’t a great quarter, but it is not the end of the world. If you are a little antsy about the stock, then sell it. There are lots of other places to put your money. We are raising our Sell Price to $48, which it could hit easily if the Dow takes a nose-dive in the next few weeks. Long term, Microsoft will do just fine. They have tons of cash ($100 billion) and $45 billion in long term debt. We know they are not a growth story any more, but are a value stock with great prospects ahead. Nothing wrong with that.