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Why 43% of Analysts Rate Kinder Morgan ‘Buy’ before 2Q16 Results

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Analyst recommendations

Analysts’ median target price for Kinder Morgan (KMI) for the next year is $19.70. The low and high target prices for the stock over the same period are $17 and $36, respectively. The median target price implies a 2.4% price return over the next year compared to KMI’s current price of $19.20.

About 43% of the analysts surveyed have rated Kinder Morgan a “buy,” while 52% have rated it a “hold.” Nearly 5% have rated it a “sell.”

The above table shows recommendations for KMI from some of the brokers that were surveyed.

In comparison, 67% of analysts rated Energy Transfer Partners (ETP) a “buy.” About 50% of analysts rated Williams Partners (WPZ) a “buy,” and 86% rated Enterprise Products Partners (EPD) a “buy.”

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Outlook for KMI

On July 6, 2016, Kinder Morgan announced a ten-year agreement with Nucor. The value of the agreement is ~$900 million.

Kinder Morgan expects to declare dividends of $0.50 per share for 2016. It intends to use the remaining cash to fund growth projects and strengthen its balance sheet.

In the company’s 1Q16 earnings release, Steve Kean, president and CEO (chief executive officer), said, “We continue to focus on high-grading our growth project backlog to allocate capital to the highest return opportunities by reducing spend, improving returns and selectively joint venturing projects where appropriate.”

KMI’s sale of equity interests in the Utopia pipeline to Riverstone Investment Group and the Southern Natural Gas pipeline system to Southern Company (SO) are efforts to strengthen its balance sheet through joint venturing.

Kinder Morgan seems to be taking steps in the right direction. These should reflect in its stock price going forward.

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