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Actionable news in KMI: KINDER MORGAN Inc,

Kinder Morgan's Stock May Fall To $10 A Share

Summary

There has been a lot of debate regarding the appropriate value for Kinder Morgan’s stock price.

The company is no longer an MLP, so those metrics don’t really apply any longer. This has left dividend growth and income investors in quite a quandary as of late.

After careful consideration, I feel the company’s fair value at present is $10 per share.

In the following article, I make my case.

The Future looks dim

Kinder Morgan (NYSE: KMI) has taken income investors on a heck of a roller coaster ride over the past few years. Kinder Morgan management on the earnings conference call displayed quite a bit of uncertainty regarding several very important backlog growth projects. The pipeline giant says it is further cutting its 2016 capital spending plans to $2.9 billion from $3.3 billion set early in January. Furthermore, the company is paring the previously reported $18.2 billion five-year backlog to $14.1 billion. The removal of the Northeast Energy Direct (NED) project accounts for the biggest chunk of $3.9 billion in growth cuts. This lowered guidance for the balance of 2016 as well. Kinder Morgan now expects EBITDA and distributable cash flow to come in approximately 3% and 4% below the original plan. The company currently sports a trailing two-month P/E of 460.26 according to Finviz.com. This leads me to believe the stock is significantly overvalued.

Source: Finviz.com

Is this a big deal? I say it is. Furthermore, it all related back to the tremendous debt load the company took on in preparation for the enormous growth that seems to be withering away as we speak. It goes back to the age-old axiom of never counting your chickens before they hatch.

Chicken counting problems

The problem is the company is presently strapped with a significant debt load it needs to service. The thoughts of increasing dividend payouts and exponential growth have taken a back seat to the immediate need for a debt reduction plan. The problem is the...


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