The energy world a surprising hotbed of activity in 2024, with oil and gas stocks even outperforming the AI-fueled tech sector. Crude oil prices (CLK24) have surged, propped up by robust economic data, a softer U.S. dollar, simmering geopolitical tensions, and the impact of OPEC+ production cuts.
This backdrop is boosting the fortunes of energy stocks - and one way to play the breakout is by targeting top players in the midstream space, like Kinder Morgan (KMI). With its vast network of pipelines and storage facilities, KMI is instrumental when it comes to transporting natural gas (NGK24), crude oil, and other key commodities across North America.
With its generous dividend yield, the stock has long been a favorite among income investors - but with KMI setting a new 52-week high in recent sessions, it's officially breaking out on the charts, too. Here's a closer look at this hot energy stock.
About Kinder Morgan Stock
Valued at $40 million by market cap, Houston-based Kinder Morgan (KMI) stands out as one of the largest energy infrastructure companies in the country. KMI operates 82,000 miles of pipeline that transport gasoline, jet fuel, diesel, and more, and the company moves about 40% of the natural gas produced domestically through its network of pipelines.
Broadly speaking, midstream energy companies are favored by investors for offering relative stability within a cyclical business, since their earnings derived from contracts or leases tied to the usage of their infrastructure, rather than being tied to volatile energy prices. Additionally, the best midstream stocks are known for offering generous dividends.
KMI hasn't been a standout performer on the charts, up just 4% over the past 52 weeks. However, the stock did set a new annual high last week, hinting at some positive momentum.
Given the somewhat muted price action, KMI can still be picked up at a relative discount. The shares trade at a forward price/sales ratio of 2.30, representing a discount to its longer-term average multiple of 2.62.
The company has a stellar track record of dividend payments, too. Kinder Morgan is currently offering a quarterly dividend of $1.28 per share. This gives investors a handsome dividend yield of 6.13%, based on the current stock price - and KMI has been raising these payouts steadily for the last 6 years.
KMI's Bright Forecast
In the fourth quarter of 2023, KMI reported adjusted earnings of $0.28 per share on $4.04 billion in revenue, which fell short of Wall Street's expectations on both counts. Higher interest expenses pressured results, as did a supply glut of natural gas in storage.
For the full year 2023, KMI generated $6.5 billion of cash flow from operations, and spent $2.5 billion in dividends, alongside $500 million in share buybacks.
Looking ahead to the full year, CEO Kim Dang is upbeat. Earnings per share are expected to rise 15% year-over-year in fiscal 2024, and “we expect really nice growth over '23, with every business unit expected to contribute,” she said on the conference call.
Currently, Wall Street is anticipating EPS growth of 10% in fiscal 2024, with revenue expected to increase 16% year-over-year.
Keeping with the broader trend in the energy space, Kinder Morgan has reportedly been eyeing the M&A scene - and particularly in the sizzling LNG market. Bloomberg's Elizabeth Elkin reported that at a recent energy conference, Kinder Morgan's VP of public affairs, Allen Fore, was talking up potential deals in the natural gas realm, with a lot of those opportunities circling around LNG.
And they're not stopping there — renewables are also in their sights as a big growth target, including carbon capture opportunities.
What Do Analysts Expect for KMI Stock?
Out of 19 analysts tracking KMI stock, the consensus is leaning towards a "Moderate Buy." To break it down, 5 analysts are giving it a "Strong Buy," one is going with a "Moderate Buy," a dozen are playing it safe with a "Hold," and just a single naysayer is hitting it with a "Moderate Sell" rating.
These analysts have set their sights on a mean target price of $20.31 for KMI. That's a potential upside of 10% from Friday's close.
The Bottom Line on KMI Stock
Wrapping things up, Kinder Morgan (KMI) looks like an interesting choice in the energy sector as the shares break out to new highs. With its steady business model, dominant footprint in the midstream, and eye on strategic growth, this high-yield stock is worth considering for income investors and energy prospectors alike.
On the date of publication, Ebube Jones did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
