NEW YORK (TheStreet) -- Shares of Kinder Morgan Inc. (KMI - Get Report) are up 14.20% to $41.25 in pre-market trade after it was reported that the Houston billionaire Richard Kinder is consolidating his pipeline empire to strengthen it for growth as the U.S. shale drilling boom opens up $1.5 trillion in potential purchases and expansion projects, Bloomberg reports.
The company plans to acquire all of Kinder Morgan Energy Partners LP (KMP), Kinder Morgan Management LLC (KMR) and El Paso Pipeline Partners LP (EPB) in a series of transactions valued at about $44 billion, according to a statement yesterday.
The move by Kinder, who controls the entities through his 24% stake in the parent company, runs counter to the industry trend of spinning off pipelines and oil terminals into tax-advantaged partnerships that funnel cash to investors. By simplifying his empire’s corporate structure, Kinder will lower borrowing costs and unify the company under a single stock that he can use as currency to buy competitors, according to Bloomberg.
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 lackluster performance in the stock itself."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The revenue growth came in higher than the industry average of 2.1%. 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 -7.19%.
- 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