NEW YORK (TheStreet) -- Kinder Morgan (KMI - Get Report) stock is furthering its decline 4.33% to $15.70 this morning as the company reviews its financing plans and investors worry that it will cut its dividend.
Shares of the energy company have tanked more than 30% since Wednesday. Last Tuesday, credit ratings provider Moody's (MCO) downgraded Kinder Morgan's credit outlook to "negative" from "stable," citing concern about its decision to increase its stake in debt-laden Natural Gas Pipeline (NGPL). Moody's rates Kinder Morgan one notch above junk.
"Balanced against all the negatives of the debt in that last piece of paper they did is [co-founder] Rich Kinder, and he is revered in the industry and people feel that he must have something," TheStreet's Jim Cramer said on CNBC's Squawk on the Street this morning. "He must have something up his sleeve."
Cramer grouped Rich Kinder with billionaire media mogul John Malone as people who are revered in their respective industries.
He pointed out that around this time last year, in November of 2014, Rich Kinder stated that the company would raise distributions for years and years, and the stock shot up.
"We have to hear from [Kinder] before we pronounce him guilty," Cramer contended. "But the stock has been pronounced guilty."
During yesterday's Squawk on the Street show, Cramer argued that Rich Kinder was likely thinking longer-term with the NGPL deal while the shareholders are thinking shorter-term. If natural gas continues to be the dominant fuel, Kinder Morgan will have a huge pipeline, he noted.
Additionally, Kinder Morgan bonds reversed losses yesterday, which could be an arbiter of a dividend cut to provide more money for the bonds, Cramer mentioned this morning.
"We don't know what rabbit out of the hat [Kinder] can pull. Not all people hate pipelines. Witness Carleton English's excellent piece this morning about Warren Buffett," Cramer stated. "But there is a sense that the bonds need to be preserved, which means the dividend must be cut."
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 36.8%. 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.
- Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 53.96%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 75.00% compared to the year-earlier quarter. Despite the heavy decline in its share price, this stock is still more expensive (when compared to its current earnings) than most other companies in its industry.
- 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 24.2% in earnings ($0.72 versus $0.95).
- You can view the full analysis from the report here: KMI