Kinder Morgan Inc. KMI recently announced its preliminary financial forecasts for 2017. Kinder Morgan’s price chart reveals that its stock has surpassed the Zacks categorized Zacks sub industry Oil & Gas-Production/Pipeline Market, year to date. While Kinder Morgan has gained 43.8%, the broader market has increased 31.8%. We wait to see if the aforesaid announcement leads to further stock price movement.
The company expects to generate $4.46 billion of distributable cash flow in 2017. Kinder Morgan’s backlog of $13 billion, comprising energy infrastructure expansion prospects, further emphasizes its strength and flexibility.
The company anticipates backlog to be placed in service over the next few years. This is likely to maximize shareholder value as well as generate cash flow in excess of Kinder Morgan’s investment requirements. In order to maximize shareholder value, the company intends to use a considerable portion of the excess cash flow to increase its dividend. In 2017, Kinder Morgan targets dividends of 50 cents per share. The company believes that it will be able to provide the guidance on a revised dividend policy in the latter part of 2017, with the potential of delivering additional value to its shareholders in 2018. This apart, Kinder Morgan plans to maintain a solid investment grade rating and keep pursuing attractive return projects and acquisitions.
Kinder Morgan expects to end 2017 with debt to adjusted EBITDA ratio of 5.4 times. This is likely to improve in case of additional proceeds generated by joint ventures. Kinder Morgan’s 2017 budget takes into consideration that the company’s TransMountain expansion project will have a joint venture partner and it will contribute substantially to the expansion capital. However, the budget does not estimate any potential proceeds beyond the partner’s share of expansion capital to identify the value created in developing the project to this stage.
Kinder Morgan also expects to generate distributable cash flow of $1.99 per share and adjusted EBITDA of $7.2 billion, flat with 2016. This is mainly due to contributions from expansion projects brought online largely offsetting the full-year effect of the Sep 1, 2016, sale of a 50% interest in SNG, the year-over-year decline in realized oil prices in its CO2 segment, lower contributions from certain gathering and processing assets as well as the impact from a rate case on CIG settled during 2016.
Kinder Morgan intends to invest $3.2 billion on expansion projects in 2017. This is likely to be funded through excess, internally generated cash flow, without the need to access equity markets during 2017.
Kinder Morgan currently has a Zacks Rank #3 (Hold). Some better-ranked players in the same sector include SunCoke Energy Inc. SXC, Suncor Energy, Inc. SU and Futurefuel Corp. FF. All these stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
SunCoke Energy posted a positive earnings surprise of 177.78% in the last reported quarter. It reported a positive earnings surprise in three of the four preceding quarters.
Suncor Energy posted a positive earnings surprise of 300.00% in the preceding quarter. It reported an average earnings surprise of 40.55% for the four preceding quarters.
Futurefuel Corp. posted a positive earnings surprise of 20.83% in the last reported quarter. It reported a positive earnings surprise in all of the four preceding quarters.
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