Kinder Morgan Gains On Quarterly Profit Beat; Street Says Hold

Shares of Kinder Morgan rose 3.1% in Wednesday’s extended market session after the natural gas pipeline operator posted a better-than-feared profit for the fourth quarter and expects earnings to improve this year.

Kinder Morgan (KMI) earned an adjusted $0.27 per share in the fourth quarter, up from the $0.26 posted in the year-ago period and outperforming the $0.24 forecasted by analysts. Revenue declined to $3.12 billion versus $3.35 billion a year ago, but came in above analysts’ estimates of $3.05 billion. Natural gas transport volumes were down 2% compared to the fourth quarter of 2019.

“We are optimistic that the U.S. and global economies are poised for a strong recovery as the vaccines are distributed and we return to normal activity,” said KMI CEO Steve Kean. “The measures we took in the face of that unprecedented challenge — maintaining capital spending discipline, reducing expenses, and increasing operational efficiency — will all contribute to a stronger company in the months and years ahead. The services we provide and the products we move remain critical to the quality of life of millions of our fellow citizens, and we expect demand for those services and products to rebound as the economic recovery takes hold.”

In addition, Kinder Morgan’s board of directors raised the fourth quarter cash dividend by 5% to $0.2625 per share year-on-year, implying an annualized dividend of $1.05. The dividend is payable on February 16, 2021, to common stockholders of record as of the close of business on February 1, 2021.

For this year, the board expects to increase the dividend by 3% for 2021, to an annualized $1.08 per share. Moreover, Kinder Morgan plans share repurchases of up to $450 million.

Looking ahead, Kinder Morgan is forecasted to generate full-year 2021 net income of $2.1 billion, or $0.92 earnings per share, compared with $119 million in 2020.

Shares in Kinder Morgan have been hit hard, declining 27% over the past year. Raymond James analyst Justin Jenkins this month downgraded the stock to Hold from Buy, as KMI trades at a 2022E EV/EBITDA multiple of ~9x vs. other midstream peers of ~9.5x.

“Our call on KMI is largely driven by our view of how the stock lines up vs. other large-cap midstream C-Corps,” Jenkins wrote in a note to investors. “While KMI isn’t devoid of upside exposure (refined products, G&P, CO2/oil prices), these are small items at KMI’s scale. Further, idiosyncratic cash flow headwinds are driving Y/Y EBITDA declines for KMI in 2021 that bring into question the multi-year trajectory — and could limit financial flexibility over time.” (See Kinder Morgan stock analysis on TipRanks)

The rest of the Street is sidelined on the stock. The Hold analyst consensus shows 7 Hold ratings, 1 Sell rating and 2 Buy ratings. Meanwhile, the average price target of $16 implies 2.6% upside potential from current levels.

Meanwhile, according to TipRanks Smart Score system, KMI scores a 8 out of 10, which indicates a strong chance of outperformance.

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