On Sep 18, Zacks Investment Research upgraded one of the
largest publicly traded master limited partnerships (MLPs),
Kinder Morgan Energy Partners L.P.
), to a Zacks Rank #2 (Buy).
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Why the Upgrade?
Kinder Morgan is a premier MLP with an impressive track record of
distribution growth and financial discipline. The partnership has
invested a significant amount in a number of projects that should
drive growth in the future.
On Sep 3, Kinder Morgan announced the completion of Parkway
Pipeline, a joint venture (JV) with
Valero Energy Corp.
). The pipeline has started transferring refined petroleum
products and the partnership stands to benefit from the 50% stake
it holds in the project.
The partnership's other initiatives include forming a midstream
JV to pursue two new projects with MarkWest Utica EMG L.L.C - a
MarkWest Energy Partners, L.P.
) and The Energy and Minerals Group ("EMG"). Prior to that, in
July, Kinder Morgan had formed another JV with Keyera Corp. to
develop a crude oil rail loading facility in Edmonton, Alberta.
On Jul 17, Kinder Morgan reported second quarter earnings of 49
cents, up almost 32.4% from the year-ago profit of 37 cents.
Revenues also increased roughly 50.1% to $3,017.0 million from
$2,010 million in the year-ago quarter, surpassing the Zacks
Consensus Estimate of $2,720.0 million.
The partnership's distribution story also looks promising. Kinder
Morgan raised its quarterly cash distribution 7% y-o-y to $1.32
($5.28 annualized) per common unit, reflecting its 48th quarterly
distribution hike. This distribution is fueled by growth
opportunities in the midstream energy sector, with more emphasis
on the natural gas shale plays as well as coal export business.
All these positives are considered in the company's long-term
expected earnings growth of 8.25%. The Zacks Consensus Estimate
for the third quarter has moved up 3 cents (or 5.5%) to 58 cents
over the last 60 days. The Zacks Consensus Estimate for the full
year is currently pegged at $2.48, after moving up 7 cents (or
2.9%) in the same time frame.
Other Stocks to Consider
In addition to Kinder Morgan, one can also consider other energy
pipelines and terminal operators like
Magellan Midstream Partners LP
) that currently sport a Zacks Rank #1 (Strong Buy).