On Thursday, CFRA maintained a Buy rating on Kinder Morgan (NYSE:KMI) and raised the stock's price target from $24.00 to $28.00. The adjustment reflects a valuation based on a 10.7x multiple of the projected enterprise value to 2025 EBITDA, which is a slight increase over Kinder Morgan's historical average. The firm justifies the elevated price target with the growing demand for natural gas logistics in significant oil basins and the potential demand from data centers.
The third-quarter earnings per share (EPS) for Kinder Morgan were reported at $0.25, which was a cent below the consensus forecast. Despite this, CFRA has reduced its 2024 EPS estimate marginally by $0.01 to $1.17 but increased the 2025 EPS projection by $0.08 to $1.32. The firm's analyst suggests that natural gas is likely to be favored for meeting incremental power demand due to the challenges associated with renewable energy sources.
The current Henry Hub benchmark natural gas price stands at a relatively low $2.37 per million British thermal units (MMBtu). However, CFRA anticipates a moderate increase in natural gas prices by 2025. Kinder Morgan has maintained its dividend at an annualized rate of $1.15 per share, corresponding to a yield of 4.7%.
In other recent news, Kinder Morgan has been the focus of several noteworthy developments. BofA Securities initiated coverage of Kinder Morgan with a Buy rating and a price target of $27.00, citing expected stabilization and slight improvement in the company's base business. The firm also anticipates an increase in the company's distributable cash flow by approximately $200-$300 million over the next few years due to increasing storage rates and declining interest rates.
Truist Securities raised its price target for Kinder Morgan to $25, maintaining a Hold rating, highlighting 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 in the third quarter and announced a $3 billion South System Expansion 4 Project, anticipating a substantial rise in natural gas demand.
Kinder Morgan's Board declared a quarterly dividend of $0.2875 per share, marking a 2% increase from the previous year. The company is preparing for a 25 Bcf per day market growth over the next five years, driven by LNG exports, electric generation, and exports to Mexico. Despite the halt of the Cumberland project due to a U.S. court decision, Kinder Morgan is positioned to navigate regulatory hurdles, demonstrating its commitment to growth.
InvestingPro Insights
Kinder Morgan's financial metrics and market performance align with CFRA's bullish outlook. According to InvestingPro data, the company's stock has shown impressive momentum, with a 53.15% total return over the past year and a 44.48% return in the last six months. This strong performance has brought the stock price to 97.56% of its 52-week high, supporting CFRA's decision to raise the price target.
InvestingPro Tips highlight that Kinder Morgan has raised its dividend for 6 consecutive years and maintained dividend payments for 14 consecutive years. This consistent dividend policy, coupled with the current dividend yield of 4.61%, reinforces CFRA's observation about the company's 4.7% yield and its ability to manage dividends effectively.
The company's financial stability is further evidenced by its profitability over the last twelve months and analysts' predictions of continued profitability this year. These factors contribute to Kinder Morgan's capacity to balance capital expenditures and dividends, as noted in the CFRA report.
For investors seeking more comprehensive analysis, InvestingPro offers 13 additional tips for Kinder Morgan, providing a deeper understanding of the company's financial health and market position.
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