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Why Kinder Morgan (KMI) Stock Is Gaining Today

NEW YORK (TheStreet) -- Kinder Morgan (KMI - Get Report) shares are up 0.6% to $41.40 on Tuesday after analysts at RBC Capital raised its price target to $45 from $40. 

The upgraded outlook is a result of the deal that combines all of the diversified energy transportation and storage assets under one stock.

Kinder Morgan plans to unify all of its energy stock's under the KMI ticker, consolidating its diversified securities under one umbrella.

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"This transaction dramatically simplifies the Kinder Morgan story, by transitioning from four separately traded equity securities today to one security going forward, and by eliminating the incentive distribution rights and structural subordination of debt," Kimder CEO Richard Kinder recently said.

The new KMI will have a projected dividend of $2.00 that the company expects to grow by 10% yearly from 2015 through 2020.

"[W]e remain positive on KMI's proposed acquisition of KMP, KMR and EPB. KMI has effectively created an MLP in a corporate structure in our view... iven the cash tax savings that KMI can realize through this transaction, we estimate a very low cash tax rate for KMI, which we believe should enable it to effectively compete with MLPs for projects and acquisition," said analysts at the firm.

TheStreet Ratings team rates KINDER MORGAN INC as a Buy with a ratings score of B. TheStreet Ratings Team has this to say about their recommendation:

"We rate KINDER MORGAN INC (KMI) a BUY. This is driven by a few notable strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its robust revenue growth, good cash flow from operations, expanding profit margins, increase in net income and increase in stock price during the past year. We feel these strengths outweigh the fact that the company has had generally high debt management risk by most measures that we evaluated."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The revenue growth came in higher than the industry average of 2.6%. Since the same quarter one year prior, revenues rose by 16.4%. This growth in revenue does not appear to have trickled down to the company's bottom line, displaying stagnant earnings per share.
  • Net operating cash flow has increased to $1,085.00 million or 14.21% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of -6.58%.
  • 38.48% is the gross profit margin for KINDER MORGAN INC which we consider to be strong. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of 7.21% trails the industry average.
  • The net income growth from the same quarter one year ago has exceeded that of the S&P 500, but is less than that of the Oil, Gas & Consumable Fuels industry average. The net income increased by 2.5% when compared to the same quarter one year prior, going from $277.00 million to $284.00 million.
  • KINDER MORGAN INC reported flat earnings per share in the most recent quarter. The company has suffered a declining pattern of earnings per share over the past year. However, we anticipate this trend reversing over the coming year. During the past fiscal year, KINDER MORGAN INC reported lower earnings of $1.15 versus $1.22 in the prior year. This year, the market expects an improvement in earnings ($1.23 versus $1.15).
  • You can view the full analysis from the report here: KMI Ratings Report

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