Why Kinder Morgan Energy Partners (KMP) Stock Hit a One-Year High Today

NEW YORK (TheStreet) -- Kinder Morgan Energy Partners  (KMP) surged to a new 52-week high of $98.67 on Monday after Kinder Morgan  (KMI) announced it would combine all of its oil and gas pipeline and storage companies into one entity.

Kinder Morgan, Kinder Morgan Energy Partners, Kinder Morgan Management (KMR) and El Paso Pipeline Partners  (EPB) will all trade under the KMI symbol as part of the Kinder Morgan umbrella. The new entity will be the fourth-largest U.S. energy company by market value. The four companies' combined market value at the closing bell Friday was $92 billion.

Kinder Morgan will spend $71 billion, including $27 billion in assumed debt, to purchase the three other companies.

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Kinder Morgan Energy Partners was up 14.4% to $91.91 at 10:22 a.m. More than 14 million shares had changed hands, compared to the average volume of 1,078,830.

Separately, TheStreet Ratings team rates KINDER MORGAN ENERGY -LP as a "buy" with a ratings score of A-. TheStreet Ratings Team has this to say about their recommendation:

"We rate KINDER MORGAN ENERGY -LP (KMP) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its robust revenue growth, expanding profit margins and good cash flow from operations. 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 18.6%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • 39.03% is the gross profit margin for KINDER MORGAN ENERGY -LP which we consider to be strong. It has increased from the same quarter the previous year. Along with this, the net profit margin of 18.47% significantly outperformed against the industry average.
  • Net operating cash flow has increased to $1,175.00 million or 20.02% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of -7.19%.
  • KINDER MORGAN ENERGY -LP 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. This company has reported somewhat volatile earnings recently. We feel it is likely to report a decline in earnings in the coming year. During the past fiscal year, KINDER MORGAN ENERGY -LP increased its bottom line by earning $3.80 versus $1.64 in the prior year. For the next year, the market is expecting a contraction of 30.1% in earnings ($2.66 versus $3.80).
  • The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. Compared to other companies in the Oil, Gas & Consumable Fuels industry and the overall market on the basis of return on equity, KINDER MORGAN ENERGY -LP has underperformed in comparison with the industry average, but has exceeded that of the S&P 500.
  • You can view the full analysis from the report here: KMP Ratings Report

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Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.

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