Story updated at 10 a.m. to reflect market activity.
Shares of Kinder Morgan gained 1.3% to $37.98 in morning trading.
The analyst firm said the oil and gas pipeline company is "one of our top picks in the broader MLP/energy infrastructure sector." Kinder Morgan's tax shield is underappreciated ahead of its planned acquisition of Kinder Morgan Energy (KMP) , Kenmare Resources (KMR) , and El Paso Pipeline (EPB) , the analysts added.
"Management has guided to KMI benefiting from a total of $20 billion of tax savings over the next 14 years as a result of the asset step-up associated with the pending merger," analysts Gabe Moreen, Ray Fu, Derek Walker, and Kathleen Morris wrote. "We estimate the net present value (NPV) of such tax savings to be $12.5 billion using a 7% discount rate, or ~$6 per share (pro-forma)."
The analyst firm set a price target of $47 for Kinder Morgan.
Separately, 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 multiple 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 notable return on equity. 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 3.1%. 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 -5.24%.
- 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