Shares of Kinder Morgan Inc. KMI hit a 52-week low of $22.36 on Tuesday, Dec 1. Year to date, shares of this energy infrastructure company have delivered a negative return of roughly 47.0%.
What Led to the Share Price Decline?
Kinder Morgan’s share price has been trending downward since it reported lackluster third-quarter 2015 results on Oct 21. The company’s revenues decreased 13.6% year over year to $3,707 million and came below the Zacks Consensus Estimate of $3,776 million. The underperformance stemmed mainly from low commodity prices.While West Texas Intermediate (WTI) crude futures are currently hovering around $41 per barrel, natural gas prices tumbled 7.8% over the past week to $2.21 per million Btu.
Kinder Morgan is the largest energy infrastructure company in North America. It owns an interest in or operates approximately 84,000 miles of pipelines and 165 terminals. The company’s pipelines transport natural gas, gasoline, crude oil, CO2 and other products, and its terminals store petroleum products and chemicals, and handle bulk materials like coal and petroleum coke. Kinder Morgan is the largest midstream and the third-largest energy company in North America with an enterprise value of approximately $115 billion.
But like all other oil and gas majors, Kinder Morgan remains vulnerable to volatile crude oil and natural gas prices, an imbalance between supply and demand for its products and rising interest rates. Such factors can hurt the company’s volumes and margins.
Moreover, Kinder Morgan’s distribution growth prospects are closely linked to the successful completion of organic growth projects, which in turn might be affected by operational hindrance, cost inflation and overruns, and delays in completion.
Additionally, although Kinder Morgan possesses solid cash flow stability from quality pipeline and storage assets, we believe that higher gasoline and feedstock prices will marginally increase the risk profile of its refined product pipeline assets. Even with its diversified set of assets, Kinder Morgan has little exposure to the shale oil infrastructure.
Bottom Line
Now that Kinder Morgan is touching new 52-week lows – having hit its lowest mark in a year – is this the right time to buy its shares? As of now, the answer is no. Rather we would advise investors to wait for a better entry point before accumulating Kinder Morgan shares. The Zacks Rank #3 (Hold) seems to suggest the same. Some better-ranked players in the energy sector are Energy Transfer Equity, L.P. ETE, Murphy USA Inc. MUSA and Boardwalk Pipeline Partners, LP BWP. Each of these stocks sports a Zacks Rank #1 (Strong Buy).
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