Analysis of Profitability Ratios
Profitability ratios measure the company ability to generate profitable sales from its resources (assets).
Profitability Ratios (Summary)
Return on Sales
Return on Investment
Kinder Morgan Inc., profitability ratios
Based on: 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31).
Profitability indicators for the period between 2015 and 2019 exhibit a general upward trajectory, characterized by a significant expansion in margins and returns, particularly following a period of volatility observed in 2017.
- Profit Margin Trends
- Gross profit margin remained robust and relatively stable, fluctuating between a low of 68.30% in 2017 and a peak of 75.30% in 2019. Operating profit margin demonstrated more aggressive growth, increasing from 16.99% in 2015 to 36.89% in 2019, which indicates a substantial improvement in operational efficiency. Net profit margin showed the highest degree of volatility, declining to 1.34% in 2017 before experiencing a sharp recovery to reach 16.58% by the end of 2019.
- Return on Investment Metrics
- Return on Equity (ROE) and Return on Assets (ROA) mirrored the volatility and subsequent recovery seen in the net profit margin. ROE rose from 0.72% in 2015 to 6.49% in 2019, while ROA increased from 0.30% in 2015 to 2.95% in 2019. While these absolute percentages remain low, the consistent growth from 2017 onward suggests an improved capacity to generate earnings from the company's asset base and shareholder equity.
- Overall Performance Synthesis
- The data reveals a strong correlation between the expansion of the operating margin and the subsequent rise in net profit and returns. The dip in 2017 across net profit, ROE, and ROA suggests a period of temporary financial pressure or non-operating headwinds, followed by a period of rapid profitability acceleration from 2018 through 2019.
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Gross Profit Margin
Kinder Morgan Inc., gross profit margin calculation
Based on: 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31).
1 2019 Calculation
Gross profit margin = 100 × Gross profit ÷ Revenues
= 100 × 9,946 ÷ 13,209 = 75.30%
The analysis of profitability between 2015 and 2019 reveals a period of fluctuation in both top-line revenue and gross profitability. While absolute revenue figures varied, the gross profit margin demonstrated resilience, ultimately reaching its five-year peak by the end of the observed period.
- Revenue and Gross Profit Correlation
- Between 2015 and 2016, a decrease in revenue from 14,403 million US$ to 13,058 million US$ coincided with an increase in the gross profit margin to 73.21%. This inverse relationship suggests that the cost of sales decreased more significantly than the revenue decline during this interval.
- Mid-Period Margin Compression
- A notable contraction in the gross profit margin occurred in 2017 and 2018, with values dropping to 68.30% and 68.74%, respectively. During this timeframe, absolute revenues recovered to 14,144 million US$ by 2018, yet the margin remained suppressed, indicating an increase in the relative cost of generating those revenues.
- Operational Efficiency in 2019
- The most significant margin expansion occurred in 2019, where the gross profit margin rose to 75.30%. This improvement is particularly noteworthy as it was achieved despite a decline in total revenue to 13,209 million US$, reflecting a substantial improvement in operational efficiency or a more favorable cost structure.
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Operating Profit Margin
Kinder Morgan Inc., operating profit margin calculation, comparison to benchmarks
| Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | Dec 31, 2016 | Dec 31, 2015 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Operating income | 4,873) | 3,794) | 3,544) | 3,572) | 2,447) | |
| Revenues | 13,209) | 14,144) | 13,705) | 13,058) | 14,403) | |
| Profitability Ratio | ||||||
| Operating profit margin1 | 36.89% | 26.82% | 25.86% | 27.35% | 16.99% | |
| Benchmarks | ||||||
| Operating Profit Margin, Competitors2 | ||||||
| Chevron Corp. | — | — | — | — | — | |
| ConocoPhillips | — | — | — | — | — | |
| ExxonMobil Holdings Corp. | — | — | — | — | — | |
Based on: 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31).
1 2019 Calculation
Operating profit margin = 100 × Operating income ÷ Revenues
= 100 × 4,873 ÷ 13,209 = 36.89%
2 Click competitor name to see calculations.
Between 2015 and 2019, a significant expansion in operational profitability is observed, characterized by a substantial increase in the operating profit margin despite inconsistent revenue growth.
- Operating Profit Margin Trend
- The operating profit margin experienced a sharp rise from 16.99% in 2015 to 27.35% in 2016. Following a period of relative stability between 2016 and 2018, where margins fluctuated slightly between 25.86% and 26.82%, a second significant surge occurred in 2019, reaching a peak of 36.89%.
- Operating Income Growth
- Operating income demonstrated a consistent upward trajectory, increasing from 2,447 million US$ in 2015 to 4,873 million US$ in 2019. This represents nearly a doubling of operating income over the five-year period analyzed.
- Revenue and Efficiency Correlation
- Revenue patterns remained volatile, with declines noted in 2016 and again in 2019, where revenues fell to 13,209 million US$. Notably, the highest operating profit margin of 36.89% was achieved in 2019, a year in which revenues decreased compared to 2018. This divergence indicates that profitability growth was driven by enhanced operational efficiency or cost reduction strategies rather than top-line revenue expansion.
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Net Profit Margin
Kinder Morgan Inc., net profit margin calculation, comparison to benchmarks
| Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | Dec 31, 2016 | Dec 31, 2015 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Net income attributable to Kinder Morgan, Inc. | 2,190) | 1,609) | 183) | 708) | 253) | |
| Revenues | 13,209) | 14,144) | 13,705) | 13,058) | 14,403) | |
| Profitability Ratio | ||||||
| Net profit margin1 | 16.58% | 11.38% | 1.34% | 5.42% | 1.76% | |
| Benchmarks | ||||||
| Net Profit Margin, Competitors2 | ||||||
| Chevron Corp. | — | — | — | — | — | |
| ConocoPhillips | — | — | — | — | — | |
| ExxonMobil Holdings Corp. | — | — | — | — | — | |
Based on: 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31).
1 2019 Calculation
Net profit margin = 100 × Net income attributable to Kinder Morgan, Inc. ÷ Revenues
= 100 × 2,190 ÷ 13,209 = 16.58%
2 Click competitor name to see calculations.
The profitability profile from 2015 to 2019 is characterized by a significant expansion in net profit margins despite relatively stagnant revenue streams. While the top line showed no clear growth trajectory, the bottom line experienced substantial growth, particularly in the final two years of the period.
- Revenue Trends
- Revenues exhibited a fluctuating but generally flat trend, remaining within a range of approximately US$ 13 billion to US$ 14.4 billion. A peak was observed in 2015 at US$ 14,403 million, followed by a decline and subsequent stabilization, ending the period at US$ 13,209 million in 2019.
- Net Income Trajectory
- Net income attributable to the company showed significant volatility in the early years, dropping to a period low of US$ 183 million in 2017. This was followed by a sharp and sustained increase, with income rising to US$ 1,609 million in 2018 and reaching US$ 2,190 million by 2019.
- Net Profit Margin Analysis
- The net profit margin mirrored the volatility of net income, dipping to 1.34% in 2017 before expanding aggressively. The margin rose to 11.38% in 2018 and further climbed to 16.58% in 2019. The fact that the highest profit margin occurred in 2019, a year when revenues actually declined from the previous year, suggests that the increase in profitability was driven by significant operational efficiencies or cost reductions rather than sales growth.
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Return on Equity (ROE)
Kinder Morgan Inc., ROE calculation, comparison to benchmarks
| Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | Dec 31, 2016 | Dec 31, 2015 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Net income attributable to Kinder Morgan, Inc. | 2,190) | 1,609) | 183) | 708) | 253) | |
| Total Kinder Morgan, Inc.’s stockholders’ equity | 33,742) | 33,678) | 33,636) | 34,431) | 35,119) | |
| Profitability Ratio | ||||||
| ROE1 | 6.49% | 4.78% | 0.54% | 2.06% | 0.72% | |
| Benchmarks | ||||||
| ROE, Competitors2 | ||||||
| Chevron Corp. | — | — | — | — | — | |
| ConocoPhillips | — | — | — | — | — | |
| ExxonMobil Holdings Corp. | — | — | — | — | — | |
Based on: 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31).
1 2019 Calculation
ROE = 100 × Net income attributable to Kinder Morgan, Inc. ÷ Total Kinder Morgan, Inc.’s stockholders’ equity
= 100 × 2,190 ÷ 33,742 = 6.49%
2 Click competitor name to see calculations.
The financial performance between 2015 and 2019 is characterized by a significant recovery in profitability relative to a highly stable equity base. While the early part of the period exhibited volatility, a sustained upward trajectory in earnings emerged after 2017, leading to a marked improvement in the return on equity.
- Net Income Trends
- Earnings attributable to stockholders demonstrated substantial volatility initially, rising from US$ 253 million in 2015 to US$ 708 million in 2016, before dropping to a period low of US$ 183 million in 2017. However, a period of aggressive growth followed, with net income increasing to US$ 1,609 million in 2018 and further expanding to US$ 2,190 million by the end of 2019.
- Stockholders' Equity Stability
- Total stockholders' equity remained remarkably consistent throughout the five-year period. After a slight decline from US$ 35,119 million in 2015 to a low of US$ 33,636 million in 2017, equity levels stabilized and showed marginal increases, reaching US$ 33,742 million by December 31, 2019.
- Return on Equity (ROE) Analysis
- The return on equity closely mirrored the fluctuations in net income due to the stability of the equity denominator. ROE experienced a dip to 0.54% in 2017, coinciding with the low point in net income. Subsequently, a sharp recovery occurred, with ROE climbing to 4.78% in 2018 and reaching a peak of 6.49% in 2019, indicating a strengthened ability to generate profits from shareholders' investments.
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Return on Assets (ROA)
Kinder Morgan Inc., ROA calculation, comparison to benchmarks
| Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | Dec 31, 2016 | Dec 31, 2015 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Net income attributable to Kinder Morgan, Inc. | 2,190) | 1,609) | 183) | 708) | 253) | |
| Total assets | 74,157) | 78,866) | 79,055) | 80,305) | 84,104) | |
| Profitability Ratio | ||||||
| ROA1 | 2.95% | 2.04% | 0.23% | 0.88% | 0.30% | |
| Benchmarks | ||||||
| ROA, Competitors2 | ||||||
| Chevron Corp. | — | — | — | — | — | |
| ConocoPhillips | — | — | — | — | — | |
| ExxonMobil Holdings Corp. | — | — | — | — | — | |
Based on: 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31).
1 2019 Calculation
ROA = 100 × Net income attributable to Kinder Morgan, Inc. ÷ Total assets
= 100 × 2,190 ÷ 74,157 = 2.95%
2 Click competitor name to see calculations.
The financial performance between 2015 and 2019 is characterized by a substantial increase in net income alongside a consistent reduction in the total asset base, resulting in a significant improvement in overall asset efficiency.
- Net Income Trajectory
- Net income exhibited significant volatility in the early part of the period, rising from US$ 253 million in 2015 to US$ 708 million in 2016, before declining to US$ 183 million in 2017. Following this dip, a sharp upward trend occurred, with earnings accelerating to US$ 1,609 million in 2018 and reaching US$ 2,190 million by December 31, 2019.
- Asset Base Evolution
- Total assets demonstrated a steady and continuous decline over the five-year span, decreasing from US$ 84,104 million in 2015 to US$ 74,157 million in 2019. This consistent downward trend suggests a strategic contraction or optimization of the balance sheet.
- Return on Assets (ROA) Performance
- The ROA reflects the combined impact of rising net income and a shrinking asset base. The ratio fluctuated at low levels between 0.23% and 0.88% from 2015 to 2017, but expanded rapidly to 2.04% in 2018 and 2.95% in 2019. This progression indicates a marked increase in the effectiveness of asset utilization to generate profit.
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