Kinder Morgan outperforms
Kinder Morgan (KMI) hit a fresh 52-week high on June 6. The stock has risen ~36% in 2019. The stock has outperformed the energy sector and the broader market. The Energy Select Sector SPDR ETF (XLE) has risen ~6%, while the S&P 500 Index has risen ~13% in 2019. Although Kinder Morgan’s rise looks impressive, the stock is trading at a price of less than half of its highs in 2015.
Kinder Morgan seems to have broken strongly above its 50-day moving average. There’s a possibility that Kinder Morgan might remain strong in the near term. However, the company’s 14-day RSI (Relative Strength Index) is ~68. RSI values above 70 indicate the “overbought” zone. The level might signal an imminent reversal in the stock’s direction.
Kinder Morgan’s valuation
Kinder Morgan is trading at a forward PE ratio of ~20x—lower than its three-year average PE ratio of ~24x. There seems to be some scope for a multiple expansion to bring the company close to its three-year average level. Kinder Morgan’s five-year average PE ratio is still higher at ~27x. Compared to Kinder Morgan’s peers, the company’s forward PE ratio is close to ONEOK (OKE) and lower than ~28x for Williams Companies (WMB).
In the long term, strong natural gas demand growth is expected to support Kinder Morgan’s earnings growth. Combined with a healthy project backlog and improving leverage, the company looks poised for long-term growth.
Among the 22 Reuters-surveyed analysts tracking Kinder Morgan, 16 recommended a “buy.” The stock offers an upside potential of ~4% based on its mean target price of $21.6.