Goldman Sachs (NYSE:GS) has maintained a Conviction Buy rating on Kinder Morgan (NYSE: NYSE:KMI) and increased the stock's price target to $26.00, up from the previous $23.00.
The firm's analyst cited Kinder Morgan's constructive third-quarter results and its potential to capitalize on the growing natural gas demand as reasons for the optimistic outlook.
In the recent quarterly update, Kinder Morgan announced the Final Investment Decision (FID) for the GCX expansion in the Permian Basin, open seasons for large-scale projects, and positive indications of growth potential. Management's commentary highlighted stronger demand tailwinds compared to the previous quarter and the expectation of announcing more significant projects soon.
Despite a miss in the quarter and a slight downward revision of the full-year 2024 guidance, Goldman Sachs sees these developments as positive for Kinder Morgan's future. The firm has adjusted its FY24 estimates to account for temporary commodity and volume weaknesses but has raised its longer-term estimates in anticipation of increased natural gas growth.
In other recent news, Kinder Morgan has seen a flurry of activity around its financial performance and growth prospects. CFRA maintained a Buy rating on the company and raised the stock's price target from $24.00 to $28.00, citing growing demand for natural gas logistics. Despite reporting third-quarter earnings per share (EPS) of $0.25, a cent below consensus forecast, CFRA increased its 2025 EPS projection for Kinder Morgan to $1.32.
BofA Securities initiated coverage with a Buy rating and a price target of $27.00, noting expected improvement in the company's base business. The firm anticipates an increase in the company's distributable cash flow due to rising storage rates and declining interest rates. Truist Securities also raised its price target for Kinder Morgan to $25, maintaining a Hold rating, due to the company's strong performance in the natural gas sector and potential for further growth.
Kinder Morgan reported a 2% year-over-year increase in EBITDA for the third quarter and a stable earnings per share. The company announced a $3 billion South System Expansion 4 Project, anticipating significant growth in natural gas demand. The company's board declared a quarterly dividend of $0.2875 per share, marking a 2% increase from the previous year.
InvestingPro Insights
Kinder Morgan's recent performance aligns with Goldman Sachs' optimistic outlook. According to InvestingPro data, the company's stock has shown impressive returns, with a 54.17% total return over the past year and a strong 40.29% return in the last six months. This upward trajectory is reflected in the stock trading near its 52-week high, at 97.6% of that peak.
InvestingPro Tips highlight that Kinder Morgan has maintained dividend payments for 14 consecutive years and has raised its dividend for 7 consecutive years. This consistent dividend policy supports Goldman Sachs' view on the company's stable financial position and potential for growth. The current dividend yield stands at an attractive 4.63%, which may appeal to income-focused investors.
While the company's P/E ratio of 22.06 suggests a premium valuation, it's worth noting that analysts predict Kinder Morgan will remain profitable this year. This expectation aligns with Goldman Sachs' positive outlook on the company's future performance and its ability to capitalize on growing natural gas demand.
For investors seeking a deeper analysis, InvestingPro offers 13 additional tips for Kinder Morgan, providing a more comprehensive view of the company's financial health and market position.
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