Kinder Morgan (KMI) Q1 Results - Oct 21

[dan_s]

From Stifel

Kinder Morgan, Inc. (KMI, $18.65, Hold; Target $19.00)
Low-Carbon Opportunity & Gas Macro Supportive of KMI's Outlook - Selman Akyol
Kinder Morgan posted 3Q21 results in line with our expectations, with FY21 EBITDA guidance of $7.9 billion maintained. As KMI completed its acquisition of Stagecoach and Kinetrex, management noted approximately 69% of its project backlog is related to low-carbon opportunities (natural gas, renewable diesel (RD) and RNG), with an EBITDA multiple of 3.6x. Management highlighted RD and RNG projects constituted ~$250 million of the backlog and KMI continues to target $1 to $2 billion of capex annually across the company. Additionally, with the recent surge in natural gas prices, KMI remains constructive on the outlook for natural gas well into the future. Management noted an incremental Permian gas pipeline could be needed as early as 2024 (2025 previously), with incremental gas infrastructure in the Haynesville in the 2025 to 2028 timeframe. We are maintaining our Hold rating and $19.00 TP and will revisit estimates after the release of KMI's 10-Q.

I am going to drop it from our High Yield Income Portfolio because yield is on ~6% and shares have limited upside. Size does matter in this business and KMI's size definitely gives it a high safety rating, but I think we have others in the portfolio that are just as safe with yields over 8%.

[mkarpoff]

On the other hand, 6% is nothing to sneeze at. For a 2% difference in yield, I like the idea of spreading the risk (although I am heavier in the others).

[dan_s]

True. Nothing wrong with KMI. I have a few on my Watch List that might offer higher yield and more share price upside.