Kinder Morgan Inc. (NYSE:KMI)

The financial data over the five-year period exhibits several notable trends pertaining to profitability, cost of capital, invested capital, and economic profit.

Net Operating Profit After Taxes (NOPAT)

NOPAT shows a consistent upward trajectory, increasing from $2,335 million in 2015 to $4,396 million in 2019. This reflects a sustained improvement in operational profitability and efficient management of core business activities over time.

Cost of Capital

The cost of capital has generally risen during the period, moving from 7.94% in 2015 to 9.16% in 2019. Despite a slight dip in 2017 (8.03%), the overall trend indicates an increasing required rate of return, which may reflect changing market conditions or risk perceptions associated with the company’s operations.

Invested Capital

Invested capital presents a decreasing trend, declining from $72,098 million in 2015 to $67,164 million in 2019. Although relatively stable between 2016 and 2018, the overall reduction suggests a strategic contraction or improved capital efficiency.

Economic Profit

Economic profit, which measures value creation after accounting for the cost of capital, remains negative over the entire period, indicating that the company has not generated returns exceeding its cost of capital. However, the deficit narrows progressively from -$3,389 million in 2015 to -$1,756 million in 2019, signifying an improvement in value creation and closer alignment of returns with capital costs.

In summary, while the company’s operational profits have increased markedly and invested capital has slightly declined, the rising cost of capital has made it challenging to achieve positive economic profit. Nevertheless, the steady reduction in negative economic profit points to improving value generation relative to invested capital and associated risks.

The financial data exhibits a notable progression across the five-year period from 2015 to 2019 in key profitability metrics.

Net Income Attributable to Kinder Morgan, Inc.

Net income shows a fluctuating pattern with significant variation. It increased substantially from 253 million USD in 2015 to 708 million USD in 2016, indicating a period of improved profitability. However, it then decreased sharply to 183 million USD in 2017 and slightly declined further to 160.9 million USD in 2018. In 2019, a pronounced rebound occurred, with net income surging to 2,190 million USD, representing the highest level within the period analyzed.

Net Operating Profit After Taxes (NOPAT)

NOPAT exhibits a consistent upward trajectory over the same time frame, indicating overall operational efficiency and profitability improvements. It rose steadily from 2,335 million USD in 2015 to 4,396 million USD in 2019. This steady increase contrasts the volatility seen in net income, suggesting that operational profitability strengthened continuously even during periods when net income faced short-term setbacks.

Overall, while net income experienced volatility with a significant dip in 2017 and 2018 before recovering sharply in 2019, NOPAT demonstrated consistent growth. The divergence between the volatility in net income and the stability in NOPAT could indicate the influence of non-operational factors, including one-time items, financing costs, or tax impacts affecting net income more directly. The improvement in NOPAT highlights enhanced core business performance throughout the period.

The analysis of the annual financial data reveals fluctuations in both income tax provision and cash operating taxes over the five-year period ending December 31, 2019.

Income Tax Provision

The income tax provision shows significant volatility during the period. Starting at USD 564 million in 2015, it increased notably to USD 917 million in 2016. A sharp rise was observed in 2017, with the provision peaking at USD 1,938 million. However, this high was not sustained, as the figure dropped substantially to USD 587 million in 2018, followed by a moderate increase to USD 926 million in 2019. The trend suggests that the income tax provision was influenced by fluctuating taxable income or changes in tax regulations during these years, with the 2017 value standing out as an outlier relative to other periods.

Cash Operating Taxes

Cash operating taxes remained relatively stable compared to the income tax provision. The values fluctuated within a narrow range from USD 472 million to USD 601 million throughout the five years. Notably, the cash operating taxes decreased from USD 601 million in 2015 to USD 472 million in 2016, then experienced minor increases and decreases over the subsequent years, ending at USD 590 million in 2019. This consistency indicates maintained cash tax obligations despite the volatility seen in the income tax provision, implying differences in timing or accounting recognition between these two tax-related metrics.

Overall, the data suggests that while cash taxes paid remained fairly steady, the reported income tax provisions varied considerably, reflecting potential changes in income, tax planning strategies, or tax regulation impacts during the period analyzed.

Total Reported Debt & Leases

Over the five-year period, there is a clear downward trend in the total reported debt and leases. Beginning at approximately 43.9 billion USD at the end of 2015, the debt level consistently decreased each year, reaching about 34.7 billion USD by the end of 2019. This reduction indicates a strategic effort to deleverage or reduce financial obligations over time.

Total Kinder Morgan, Inc.’s Stockholders’ Equity

The stockholders’ equity remained relatively stable throughout the period analyzed. Starting around 35.1 billion USD at the end of 2015, it experienced slight decreases over the next three years, bottoming out near 33.6 billion USD by the end of 2017. However, by the end of 2019, equity showed a minor recovery to approximately 33.7 billion USD. This stability suggests a balanced approach to equity management without significant dilution or accumulation.

Invested Capital

Invested capital demonstrated a modest decline from roughly 72.1 billion USD at the end of 2015 to about 67.2 billion USD by the end of 2019. The decrease was gradual, with minor fluctuations observed between the years, implying a steady but cautious approach to capital investment and asset base management.

Economic Profit

The economic profit, measured in US$ millions, shows a consistent negative trend across the years analyzed, indicating the company has been operating at an economic loss during the entire period. The losses decreased from -3389 million in 2015 to -1756 million in 2019, reflecting a gradual improvement though the figures remain negative.

Invested Capital

The invested capital, also in US$ millions, experienced a slight downward trend over the period, declining from 72098 million in 2015 to 67164 million in 2019. This decrease suggests a modest reduction in the capital base invested in the company's operations.

Economic Spread Ratio

The economic spread ratio, expressed as a percentage, remains negative throughout the period but improves steadily from -4.7% in 2015 to -2.61% in 2019. This trend indicates that while the company has been generating returns below its cost of capital, the gap is narrowing over time, pointing towards enhanced capital efficiency and profitability potential.

Summary

Overall, the company exhibits a pattern of gradual financial improvement. Economic losses are decreasing in magnitude, the invested capital is slightly reduced, and the economic spread ratio is moving closer to breakeven, all of which suggest progress in operational performance and capital utilization despite ongoing challenges in achieving positive economic profit.

Economic Profit

The economic profit shows a consistent negative trend over the observed periods, indicating the company operated at an economic loss each year. However, the magnitude of the loss has improved steadily, decreasing from -3389 million US dollars in 2015 to -1756 million US dollars in 2019. This improvement suggests a gradual recovery in profitability from an economic value perspective.

Revenues

Revenues remained relatively stable throughout the five-year period, fluctuating between approximately 13,000 and 14,400 million US dollars. Despite some annual variability, there is no clear upward or downward trend, with revenues peaking in 2015 and 2018 and slightly declining in 2016 and 2019. This stability suggests consistent sales performance without significant growth or contraction.

Economic Profit Margin

The economic profit margin follows a similar pattern to the economic profit, remaining negative across all years. The margin improved from -23.53% in 2015 to -13.3% in 2019, indicating a reduction in economic losses relative to revenue over time. This improving margin reflects enhanced operational efficiency or cost management despite ongoing economic losses.

Summary

The overall financial performance reveals persistent challenges in achieving positive economic profit, though there is a clear trend of improvement across the period analyzed. Revenues stayed relatively flat, implying that the improvements in economic profit and margin are likely attributable to internal efficiency gains or cost reductions rather than increased sales. The company appears to be progressively reducing its economic losses but has yet to achieve positive economic profitability.