NEW YORK (TheStreet) -- Kinder Morgan (KMI) - Get Report stock is falling by 5.01% to $26.17 in afternoon trading on Tuesday, after a money manager said master limited partnerships (MLPs) will not last with the current business model, Barron's reports.
MLPs depend on assistance from external capital markets to support their distributions and dividends.
"Their distributions and dividends are not sustainable via internally-generated, traditional free cash flow generation, as measured by cash flow from operations less all capital spending," Valuentum Securities President Brian Nelson said on Monday, Barron's added.
"Most master limited partnerships and midstream corporates may have to make the difficult decision to either cut their distributions/dividends or suspend growth plans in them altogether," he noted.
Oppenheimer echoed this sentiment with oil companies in an analyst note this morning.
The firm believes oil companies may not be able to grow or sustain their dividend because of the weak outlook for oil prices.
Houston-based Kinder Morgan transitioned from a midstream corporate business from an MLP last year, Barron's noted.
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. The company's strengths can be seen in multiple areas, such as its increase in net income, expanding profit margins and good cash flow from operations. However, as a counter to these strengths, 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:
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Oil, Gas & Consumable Fuels industry. The net income increased by 17.3% when compared to the same quarter one year prior, going from $284.00 million to $333.00 million.
- 43.66% 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 9.61% is above that of the industry average.
- Despite the weak revenue results, KMI has outperformed against the industry average of 34.6%. Since the same quarter one year prior, revenues fell by 12.0%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- The share price of KINDER MORGAN INC has not done very well: it is down 23.76% 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's earnings per share declined by 44.4% in the most recent quarter compared to 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 18.7% in earnings ($0.77 versus $0.95).
- You can view the full analysis from the report here: KMI