Is Kinder Morgan buy opportunity after the current dip?

By: Stanko Iliev
Stanko Iliev
Stanko dedicates himself to providing investors with relevant information they can use to make investment decisions. He loves the… read more.
on Nov 29, 2021
  • KMI shares have weakened from their recent highs
  • The new covid variant represents an issue
  • $15 represents strong support

Kinder Morgan, Inc. (NYSE: KMI) shares have weakened more than 10% since 18th October, and the current share price stands at $16.13.

The company’s business has proven improvements throughout the third fiscal quarter, but the new Omicron coronavirus may complicate the outlook for the industry.

The new covid variant represents an issue

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Kinder Morgan is one of the largest energy infrastructure companies in North America that operates approximately 83,000 miles of pipelines and 144 terminals.

The company’s business has proven improvements throughout the third fiscal quarter, and the company reported strong results in October. Total revenue has increased by 30.8% Y/Y to $3.82 billion, while the GAAP EPS was $0.22.

Net income for the third quarter was $495 million, up 9% from the third quarter of 2020, even though the COVID-19 delta variant held down refined products volumes during the period.

During the third-quarter earnings report call, the company’s management announced that adjusted EBITDA for the 2021 fiscal year should be around $7.9 billion. KMI Executive Chairman Richard D. Kinder said:

Our stable cash flows and guiding philosophy create a compelling investment opportunity, as we remain committed to funding our expansion capital opportunities internally, maintaining a healthy balance sheet, and returning excess cash to our shareholders through dividend increases and/or share repurchases.

The board of directors declared a $0.27/quarterly share dividend in October, which is a $1.08 annualized and 3% up from the third quarter of last year.

Kinder Morgan trades at less than six times TTM EBITDA, the current dividend yield is above 6%, and with a market capitalization of $36.8 billion, shares of this company are fairly valued.

On the other side, the Coronavirus pandemic continues to pose downside risks together with the supply chains crisis, and if the situation gets worse, Kinder Morgan will not achieve its goals.

The new Omicron coronavirus may complicate the outlook for the industry because it is unknown at this point to what degree the vaccines will be effective against the new strain and would it initiate new lockdowns around the world.

$15 represents strong support

Kinder Morgan shares have weakened from their recent highs above $18 registered in October 2021, and the current share price stands at $16.13.

Data source: tradingview.com

Kinder Morgan shares remain under pressure, and if the price falls below $15 support, it would be a strong “sell” signal. On the other side, if the price jumps above $17,  the next target could be $18 resistance.

Summary

Kinder Morgan shares have weakened more than 10% since 18th October, even though the company’s business has proven improvements throughout the third fiscal quarter. The new Omicron coronavirus may complicate the outlook for the industry, and if the price falls below $15 support, it would be a strong “sell” signal.

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