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Should You Include Kinder Morgan in Your Portfolio?

What Can We Expect from Kinder Morgan's 1Q16 Earnings Release?

(Continued from Prior Part)

Analyst ratings for Kinder Morgan

In this article, we’ll look at what Wall Street analysts recommend for Kinder Morgan (KMI). At a broader level, ~52.6% of analysts rate Kinder Morgan a “buy,” ~42.1% rate it a “hold,” and ~5.3% rate it a “sell.”

The median broker target price of $20 for KMI implies a ~14.1% price return in the next 12 months from its April 7 closing price of $17.50. KMI’s MLP peers Energy Transfer Partners (ETP) has “buy” ratings from 71.4% of analysts. 58.3% and 53.3% of analysts rate Williams Partners (WPZ) and EnLink Midstream Partners (ENLK) a “hold,” respectively. KMI alone constitutes 4.8% of the First Trust North American Energy Infrastructure ETF (EMLP).

Outlook for Kinder Morgan: Positives

  • There is a five-year project backlog of $18.2 billion.

  • In the long run, KMI is expected to benefit from the rise in natural gas demand from the power utilities and industrial customers.

Outlook for Kinder Morgan: Negatives

  • The company is highly leveraged, with a debt-to-EBITDA ( earnings before interest, tax, depreciation, and amortization) multiple of 5.6x.

  • With the recent dividend cut, KMI is no longer an attractive income opportunity. It’s currently trading at a dividend yield of 2.9%.

  • Kinder Morgan is exposed to commodity prices through its CO2 (carbon dioxide) and natural gas midstream businesses. KMI estimates that every $1 per barrel change in the WTI (West Texas Intermediate) crude oil price will impact its distributable cash flow by ~$6.5 million.

  • Of the $18.2 billion five-year project backlog, $6.4 billion worth of projects face regulatory hurdles.

For more post-earnings coverage on midstream companies, check out our Master Limited Partnerships page.

Browse this series on Market Realist:

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