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You might have noticed that the market has been brutal on stocks that report earnings or revenue misses. Sometimes, the selloff is warranted (but usually overdone), and sometimes, the market is dead wrong and puts an attractive stock “on sale.”

On August 12, energy midstream company Kodiak Gas Services (KGS) reported earnings that caused a quick 11% drop in the share price.

Just two Wall Street analysts follow Kodiak, and they expected the company to report EPS of $0.49 per share. Actual EPS came in at $0.06, so you can see why the stock sold off. However, bottom-line EPS can be a misleading metric for asset-intensive companies like Kodiak Gas Services.

Kodiak Gas Services provides natural gas compression services in major energy production plays like the Permian and Northern Rockies. The company is a leading compression provider, with an industry-leading 4.5 million horsepower fleet. KGS became a publicly traded company with its June 2023 IPO.

In April, Kodiak completed the acquisition of CSI Compressco LP to create the largest compression services energy midstream company. The all-equity transaction was valued at $854 million.

The second-quarter results include CSI results for two months. Here are some of the numbers:

• Total revenue of $310 million, up 44% compared to the 2024 first quarter.
• Discretionary cash flow of $91 million, up 24% compared to the first quarter.
• Adjusted EBITDA of $154.3 million, compared to $107.9 million for the 2023 second quarter.

On August 1, Kodiak announced a $0.41 dividend, increasing it by 8% after just three-quarters of dividend payments.

The earnings miss was due to one-time expenses related to the acquisition. In reality, KGS is a growth-focused midstream company that should provide excellent returns to investors. Income-focused investors, for the most part, have not yet discovered this stock; however, it has been a portfolio stock in my Monthly Dividend Multiplier service since soon after the IPO, and we are up over 50% since I added it.

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