Kinder Morgan, Inc. KMI looks compelling at the moment. Given the company's strong fundamentals and positive estimate revisions, it seems like this is the right time to add the stock to your portfolio.
Kinder Morgan is one of the largest energy infrastructure companies in North America. The company operates approximately 84,000 miles of pipelines that transmit natural gas, refined petroleum products, crude oil, carbon dioxide (CO2) and additional products. It has about 152 terminals that store petroleum products and chemicals, as well as ethanol, coal, petroleum coke, gasoline, jet fuel and steel. Notably, it currently has a Zacks Rank #2 (Buy), which means that the company is poised to outperform the market.
Let's delve deeper to get a clear picture.
Strong Presence in Shale Plays
The company's midstream properties are linked to all the prospective plays in the United States that are rich in natural gas. Its extensive network of natural gas pipelines, wherein the company has invested more than $32 billion to date, provide it with stable fee-based revenues. In fact, Kinder Morgan generates significant cash flow from the fees charged for using its midstream properties in the prolific regions like Bakken, Barnett, Eagle Ford, Fayetteville, Haynesville, Marcellus, Uinta Permian and Utica.
Disentangling Permian Bottleneck
Given a dearth of pipeline capacity for transporting oil to Gulf Coast export facilities from the Permian, Kinder Morgan's proposed Permian Highway Pipeline (PHP) Project materializes at the right time. The PHP project will likely come online by late 2020. This project - with all of its capacity fully subscribed under long-term agreements - is anticipated to offer additional capacity for consistent transportation of natural gas to the U.S. Gulf Coast. Also, this will help the company set appropriate tariff and eradicate the Permian bottlenecks.
Moreover, Kinder Morgan-operated pipeline system, Natural Gas Pipeline Co. (NGPL) of America, is seeking regulatory approval for compression-based expansion of about 330,000 dekatherms per day. NGPL is the backbone of feed gas supply for Sabine Pass LNG export terminal of Cheniere Energy, Inc. LNG . The company's Gulf Coast Express Pipeline and El Paso Natural Gas pipeline projects are expected to provide Permian producers with some relief from the bottleneck situation and create long-term revenue sources.
Lucrative Projects Underway
Since inception, Kinder Morgan has spent more than $50 billion on natural gas pipelines, Products Pipelines and Terminals. Majority of the spending has so long been allocated for natural gas pipelines, which are likely to help the company capitalize on clean energy demand. It has $5.7 billion worth of commercially-secured capital projects underway, among which, Elba liquefaction and related terminal facilities, as well as Bakken G&P expansions are expected to come online this year.
Focus on transporting gas supports Kinder Morgan in achieving its goal of raising dividends. Investors would be thrilled to know that the company intends to increase dividend by 25% in 2019 and 2020. While the company paid 80 cents as dividend per share in 2018, it intends to pay $1 in 2019 and $1.25 in 2020.
Bottom-Line Prospects & Earnings Estimate Revisions
Kinder Morgan reported 2018 earnings of 89 cents per share (excluding one-time items), improving 34.8% from a year ago. We believe that the positive trend will continue in the future as well. For full-year 2019, the company is expected to pos t earnings per share of $1, reflecting a 12.4% year-over-year increase. Over the past 60 days, four analysts have increased their earnings estimates for 2019.
All the aforementioned growth drivers are likely to position Kinder Morgan well in the future. Moreover, its strategic position in prolific shale plays bodes well for the company. Markedly, Kinder Morgan is well ahead of competitors. The company has gained 21.7% in the past year compared with 5.3% collective growth of the industry it belongs to.
Other Stocks to Consider
Investors interested in the energy sector can opt for other top-ranked stocks as given below:
Tulsa, OK-based SemGroup Corporation SEMG is a midstream energy company. Its top line for first-quarter 2019 is projected at $506.7 million. The stock currently has a Zacks Rank #2. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here .
Sao Paulo, Brazil-based Ultrapar Participações S.A. UGP is a refining and marketing company. Its bottom line in 2019 is expected to grow 25% year over year. The company currently holds a Zacks Rank #2.
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Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report SemGroup Corporation (SEMG): Free Stock Analysis Report Ultrapar Participacoes S.A. (UGP): Free Stock Analysis Report Kinder Morgan, Inc. (KMI): Free Stock Analysis Report Cheniere Energy, Inc. (LNG): Free Stock Analysis Report To read this article on Zacks.com click here. Zacks Investment Research