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Here's Why You Should Retain Kinder Morgan (KMI) Stock Now

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Kinder Morgan, Inc. (KMI - Free Report) has seen upward estimate revisions for 2021 and 2022 earnings in the past seven days. Also, the midstream energy company has rallied 19.7% year to date, outperforming the industry’s growth of 15.3%.

What’s Favoring the Stock?

Being a leading North American midstream energy player, Kinder Morgan has the largest natural gas transportation network in the continent. The company’s natural gas pipeline assets spreading across roughly 70,000 miles are responsible for transporting roughly 40% of U.S. natural gas consumption and exports volumes.

Moreover, being a transporter of 1.7 million barrels per day (MMB/D) of refined products through its pipeline network spreading across 6,800 miles, the company is the largest independent transporter of refined products in North America. It also has an operating interest in 147 terminals.

Kinder Morgan, currently carrying a Zacks Rank #3 (Hold), generates stable fee-based revenues from its vast network of midstream infrastructure. Notably, the company’s business model is relatively less exposed to the volatility in oil and gas prices compared to the upstream and downstream companies.

Notably, the company is firmly focused on returning capital to its shareholders. For 2021, its board of directors is foreseeing a dividend hike of 3%. The midstream firm also expects to repurchase up to $450 million of stocks this year.

Factors Deterring the Stock

Although Kinder Morgan’s business model is relatively stable, the coronavirus pandemic clouded its near-term outlook. This is because declining natural gas and crude production volumes dented demand for the company’s midstream infrastructure comprising pipeline networks and storage assets. In fact, several energy firms with midstream presence will likely be left with no option but to offer discounts to shippers to survive the pandemic.

Also, the company’s backlog was reported $1.5 billion as of the December quarter of 2020, significantly lower than the high of $22 billion reached in mid-2015. Kinder Morgan lost significant backlog with the divestment of the Trans Mountain Pipeline and its associated properties. This will likely affect its future cash flows.

Stocks to Consider

Some better-ranked players in the energy space are Diamondback Energy, Inc. (FANG - Free Report) , Matador Resources Company (MTDR - Free Report) and Magnolia Oil & Gas Corporation (MGY - Free Report) , all sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Diamondback is likely to see earnings growth of 112.5% for 2021.

Matador is likely to see earnings growth of 300% for the current year.

Magnolia Oil & Gas has witnessed northward estimate revisions for 2021 earnings in the past 30 days.

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