KMI, TRGP, OKE, and WMB: Top Midstream Gains in 2019



Top midstream gainers

Midstream C corporations have posted impressive gains in 2019. The top stocks in the sector have outperformed the broader market, the broader energy sector, and the MLP sector YTD (year-to-date). So far, Williams Companies (WMB) and Targa Resources (TRGP) have each risen ~23% in 2019. Kinder Morgan (KMI) and ONEOK (OKE) have each risen ~22% during the same period. In comparison, the Energy Select Sector SPDR ETF (XLE), which represents the S&P 500 Index’s energy sector stocks, has risen ~13% YTD.

The SPDR S&P 500 ETF (SPY) has risen ~10% YTD, while the Alerian MLP Index has risen ~8% YTD. The above graph compares the YTD performance of certain midstream stocks with XLE and SPY. The energy sector’s performance in 2019 reflects strong crude oil prices. Crude oil prices have risen ~19% YTD.

Midstream stocks, irrespective of the level of their commodity price exposure, tend to follow crude oil prices. If oil prices remain strong, the sector might witness continued strength in 2019.

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Forward PE ratio

Kinder Morgan is trading at a forward PE ratio of ~18x. ONEOK is trading at a forward PE ratio of 22x, while Williams Companies is trading at a forward PE ratio of ~27x. To learn more, read Comparing KMI, WMB, and OKE’s Valuation.

Williams Companies’ fourth-quarter results

Williams Companies reported its fourth-quarter results on February 13 after the markets closed. The stock fell ~2% in after-hours trading.

Williams Companies also announced an agreement with Targa Resources. Williams Companies will build an NGL pipeline from its fractionator in Conway, Kansas, to an interconnect that Targa Resources will construct on its Grand Prix pipeline. The extension is expected to cost Targa Resources ~$200 million. Williams Companies expects its cost for the interconnect and other related projects to be $350 million–$400 million.


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