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Why Kinder Morgan Is Outperforming and ETE Is Lagging Peers

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The sustained low-energy commodity price environment has taken a toll on small companies as well as larger midstream players. This series analyzes the earnings and balance sheets of four midstream giants: Enterprise Products Partners (EPD), Williams Companies (WMB), Energy Transfer Equity (ETE), and Kinder Morgan (KMI).

The series also compares the dividends of the four companies, as well as their coverage ratios. We’ll discover which of the selected companies is most prepared to face the sustained challenging environment. Finally, we’ll analyze the current valuation multiples and the future prospects of the selected companies.

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Year-to-date returns

As the graph above shows, both ETE and WMB have been beaten down much more compared to peers since the start of 2016. ETE and WMB have lost 48% and 35%, respectively, since the start of the year, compared to -7% returns for the Alerian MLP Index (AMZ). The Alerian MLP ETF (AMLP) has fallen 9% during the same timeframe.

Both ETE and WMB have suffered huge falls in their stock prices since the announcement of their merger in September 2015. Uncertainties surrounding the pending merger further contributed to the decline.

Kinder Morgan has been on a rising trend since mid-February when it was disclosed that Warren Buffett’s Berkshire Hathaway bought 26.5 million shares of the company.

Next, let’s look at the EBITDA (earnings before interest, tax, depreciation, and amortization) growth for the four companies in recent quarters.

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