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Sept. 10, 2019, 2:51 p.m. EDT

Despite Predicting a Higher Dividend, Kinder Morgan Takes Key Analyst Downgrade

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By 24/7 Wall St.

Kinder Morgan Inc. (NYSE: KMI) traded lower on Tuesday after an analyst downgrade added pressure on the shares. The independent research firm Argus downgraded Kinder Morgan to Hold from Buy.

While Argus sees Kinder Morgan raising its annualized dividend to $1.25 per share by 2020 (versus $1.00 annualized today), the firm's Bill Selesky believes the Hold rating is appropriate until there is a rebound in the commodities markets.

Lower-trending crude oil, natural gas and natural gas liquids prices are expected to negatively restrict systemwide volume and capacity demand for the company. Argus also sees the potential for further reductions in Kinder Morgan’s adjusted EBITDA rate and that should slow its near-term earnings growth rate.

While Kinder Morgan shares have outperformed the benchmark since the beginning of 2019 and over the past year, the earnings missed the Argus estimate. Kinder Morgan's projected backlog of $5.7 billion as of June 30 consisted of $4.8 billion in infrastructure projects and about $900 million in CO2 projects. That high backlog is actually shown to be down from $6.3 billion at the end June in 2018. The report showed that most of its backlog spending is for expanding projects in its Natural Gas Pipelines segment and it is said to adjust for the C$4.5 billion sale (Canadian dollars) of the Trans Mountain Expansion Project by Kinder Morgan Canada.

Tuesday's report said:

Other valuation metrics outlined in the Argus report were noted as follows:

The total debt/capitalization ratio was 49.9%, down from 51.3% a year earlier (slightly above the peer average). Over the past five years, the debt/cap ratio has averaged 52.6%.

Kinder Morgan shares were last seen trading down 1.2% at $20.17 on Tuesday with less than 2 hours until the market close. Its 52-week range is $14.62 to $21.50 and its consensus analyst target price from Refinitiv was last seen at $22.20.

This blog is reprinted by permission from 24/7 Wall St, © 2007 24/7 Wall St., LLC All rights reserved.

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