Kinder Morgan (KMI) Stock Down on $1.6 Billion Convertible Deal, Jim Cramer's Take - TheStreet

NEW YORK (TheStreet) -- Kinder Morgan (KMI) - Get Report  shares are extending losses by 0.69% to $27.37 on heavy trading volume today as investors reacted negatively to the company's plan to issue $1.6 billion of mandatory convertible preferred stock.

The preferred shares will be converted into common stock in three years and will carry a price of $49 each, according to Barron's.com. In addition, it will carry a 9.75% coupon.

Stocks were being pressured today on the prospects of a costly deal. 

TheStreet's Jim Cramer, Portfolio Manager of the Action Alerts PLUS Charitable Trust Portfolio commented on Kinder Morgan saying: "I am disheartened that Kinder had to pay this much for money, but this group is deep in bear market territory so that's the breaks. The only good thing is that it is a three year piece of paper so the pain won't last forever."

He added, "We prefer Energy Transfer Partners (ETP), a master limited partnership, instead of Kinder Morgan, as it just increased its distribution and it is a purer play on the cheap natural gas we have in this country. We own it for ActionAlertsPLUS.com."

Based in Houston, Kinder Morgan operates as an energy infrastructure and energy company in North America.

Separately, TheStreet Ratings team rates KINDER MORGAN INC as a Hold with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:

We rate KINDER MORGAN INC (KMI) a HOLD. The primary factors that have impacted our rating are mixed - some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. Among the primary strengths of the company is its expanding profit margins over time. At the same time, however, we also find weaknesses including a generally disappointing performance in the stock itself, feeble growth in the company's earnings per share and generally higher debt management risk.

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

  • 46.56% 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. Along with this, the net profit margin of 5.01% is above that of the industry average.
  • Despite the weak revenue results, KMI has outperformed against the industry average of 34.1%. Since the same quarter one year prior, revenues fell by 13.6%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • The change in net income from the same quarter one year ago has exceeded that of the Oil, Gas & Consumable Fuels industry average, but is less than that of the S&P 500. The net income has significantly decreased by 43.5% when compared to the same quarter one year ago, falling from $329.00 million to $186.00 million.
  • The share price of KINDER MORGAN INC has not done very well: it is down 21.55% and has underperformed the S&P 500, in part reflecting the company's sharply declining earnings per share when compared to the year-earlier quarter. Looking ahead, we do not see anything in this company's numbers that would change the one-year trend. It was down over the last twelve months; and it could be down again in the next twelve. Naturally, a bull or bear market could sway the movement of this stock.
  • KINDER MORGAN INC has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. Earnings per share have declined over the last two years. We anticipate that this should continue in the coming year. During the past fiscal year, KINDER MORGAN INC reported lower earnings of $0.95 versus $1.15 in the prior year. For the next year, the market is expecting a contraction of 18.9% in earnings ($0.77 versus $0.95).
  • You can view the full analysis from the report here: KMI