Business and Finance

Is Kinder Morgan a Winner in the Oil and Gas Industry?


The power sector has attracted a lot investor consideration to this point this yr on rallying oil and pure fuel costs amid rebounding demand. The business tailwinds have favored Kinder Morgan’s (KMI) monetary efficiency in the newest quarter. However, we expect KMI’s near-term prospects look unsure given the continued unfold of the COVID-19 Delta variant, which may hinder future power demand. Let’s focus on.

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Operating as one among the largest power infrastructure firms in North America, Kinder Morgan (KMI), in Houston, Tex., transports pure fuel, gasoline, crude oil, carbon dioxide (CO2), and extra by way of its pipelines. The firm’s terminals retailer and deal with petroleum merchandise, chemical substances, and different merchandise. KMI holds curiosity in or operates roughly 83,000 miles of pipelines and 144 terminals.

The inventory has gained 46.4% in value over the previous yr and 35.7% year-to-date to shut its final buying and selling session at $17.85. Furthermore, KMI is buying and selling above its 50-day and 200-day shifting averages. This will be attributed to optimism surrounding the oil and fuel business as the power costs attain document highs amid rebounding gasoline demand.

Rebounding fuel demand has boosted the pipeline operator’s volumes considerably. KMI’s gasoline volumes jumped 9%, whereas its jet gasoline volumes surged 56% for the third quarter. In addition, growing liquefied pure fuel exports primarily to Europe and Asia with the nearing winter heating season has elevated its fuel pipeline volumes. “We continue to benefit from growing global natural gas demand. Our assets are well-positioned to serve growing domestic markets and export locations for LNG and Mexico,” mentioned Chief Executive Officer Steve Kean. KMI additionally reported better-than-expected income progress for the quarter.

However, OPEC has cut its global oil demand growth forecast for this year. The group anticipates that the continued unfold of COVID-19 will cloud oil demand prospects. Also, the International Energy Agency (IEA) just lately warned of a rise in volatility in the power market. Fatih Birol, head of the IEA, mentioned there may be a “looming risk of more turbulence for global energy markets.” Although KMI carried out nicely throughout the third quarter of the yr, its near-term prospects might be hindered by issues associated to the unfold of the virus and the chance of diminished power demand.

Here’s what may form KMI’s efficiency in the close to time period:

Mixed Analysts Estimates

Analysts anticipate KMI’s revenues to extend 10.1% in the present quarter and 29.1% in the present yr. However, its income is predicted to say no 12.8% year-over-year to $13.17 billion in the following yr. The firm’s EPS is predicted to say no 7.4% in the present quarter and 48.3% in the subsequent quarter. But the Street expects KMI’s EPS to rise 44.3% year-over-year to $1.27 in the present yr. The firm’s EPS is predicted to develop 7.1% each year over the subsequent 5 years.

Also, of the 5 Wall Street analysts that rated the inventory, two rated it Buy, two rated it Hold, whereas one rated it Sell.

Solid Third-Quarter Earnings Report

KMI’s revenues elevated 31% year-over-year to $3.82 billion in its fiscal third quarter, ended September 30. Its working earnings stood at $844 million, up 3.1% from the identical interval final yr. Its web earnings attributable to the firm grew 8.8% from its year-ago worth to $495 million. And the firm’s EPS elevated 10% year-over-year to $0.22. In addition, its adjusted earnings and adjusted EPS elevated 4% and 5%, respectively, year-over-year.

Mixed Valuation

In phrases of ahead P/E, KMI is at present buying and selling at 23.05x, which is 79.9% greater than the 12.81x business common. Also, its 4.74 ahead EV/Sales ratio is 75.8% greater than the 2.69 business common.

However, KMI’s trailing-12-month PEG is 80.6% decrease than the 0.08 business common, and its ahead Price/Book is 27.5% decrease than the 1.81 business common.

POWR Ratings Reflect Uncertain Prospects

KMI has an general C ranking, which interprets to Neutral in our proprietary POWR Ratings system. The POWR Ratings are calculated contemplating 118 distinct elements, with every issue weighted to an optimum diploma.

The inventory has a C grade for Value, which is per its combined valuation.

KMI additionally has a C grade for Sentiment. Mixed analyst sentiment about the inventory justifies this grade.

Of the 89 shares in the Energy – Oil & Gas business, KMI is ranked #57.

Beyond what I’ve acknowledged above, one also can view KMI’s grades for Quality, Growth, Momentum, and Stability here.

View the top-rated shares in the Energy – Oil & Gas business here.

Bottom-Line

KMI delivered a strong third-quarter monetary report, triggering traders’ optimism. With rising oil and fuel costs and the rebounding gasoline demand, the bullish business tendencies have favored the firm’s efficiency to this point. However, growing instances of COVID-19 may probably turn into a vital headwind for the firm’s progress. Analysts anticipate turbulence in the power sector quickly. Considering combined analyst sentiment about the inventory and its combined valuation, we expect KMI appears much less engaging than its friends. So, it might be clever to attend for a higher entry level in the inventory.

How Does Kinder Morgan (KMI) Stack Up Against its Peers?

While KMI has an general POWR Rating of C, one  may need to take into account taking a have a look at its business friends, SilverBow Resources, Inc. (SBOW) and Baytex Energy Corp. (BTEGF), which have an A (Strong Buy) ranking.

Note that SBOW is one among the few shares handpicked by our Chief Value Strategist, David Cohne, at present in the POWR Value portfolio. Learn more here.


KMI shares had been buying and selling at $17.84 per share on Tuesday morning, down $0.01 (-0.06%). Year-to-date, KMI has gained 37.03%, versus a 23.78% rise in the benchmark S&P 500 index throughout the identical interval.


About the Author: Subhasree Kar

Subhasree Kar HS2

Subhasree’s eager curiosity in monetary devices led her to pursue a profession as an funding analyst. After incomes a Master’s diploma in Economics, she gained data of fairness analysis and portfolio administration at Finlatics.

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