On Friday, Mizuho (NYSE:MFG) Securities adjusted its outlook on Kinder Morgan (NYSE:NYSE:KMI) shares, raising the price target to $33 from the previous $31 while reiterating an Outperform rating. The revision comes in response to Kinder Morgan's performance and growth prospects, which align with the broader expectations for the Midstream sector as outlined in Mizuho's 2025 Outlook report.
The report had anticipated another positive year for the sector, though gains were not expected to match the exceptional returns seen in 2024. The company's stock has already demonstrated remarkable strength, posting an impressive 81.2% return over the past year and currently trading near its 52-week high of $30.07.
Kinder Morgan's current valuation reflects a trading multiple of 12.0x enterprise value to next twelve months' earnings before interest, taxes, depreciation, and amortization (EV/NTM EBITDA), marking the highest ratio since 2017. Mizuho attributes this elevated valuation to the optimistic market sentiment surrounding the data center and artificial intelligence theme.
Analysts at Mizuho argue that Kinder Morgan's stock has further potential for growth, supported by accelerating growth expectations and the market's recognition of the company's fundamental improvements.
According to InvestingPro data, the company currently trades at a P/E ratio of 26.33 and has maintained consistent dividend payments for 14 consecutive years, with a current yield of 3.83%. InvestingPro analysis suggests the stock is currently overvalued, with multiple indicators, including RSI, suggesting overbought conditions.
The research firm points to recent developments that reinforce Kinder Morgan's growth trajectory, such as the 2025 capital expenditure budget that exceeded market expectations and a significant $640 million acquisition in the Bakken region. These strategic moves are expected to contribute to a moderation of the trading multiple as analysts' higher EBITDA forecasts begin to reflect these advancements.
The raised price target to $33 is based on rolling estimates forward to 2027, indicating Mizuho's confidence in Kinder Morgan's continued growth and performance over the next few years. The firm's analysis suggests that Kinder Morgan's stock still has room to appreciate, driven by solid fundamentals and strategic growth initiatives.
In other recent news, Kinder Morgan is expanding its operations with a $640 million acquisition of natural gas assets from Outrigger Energy II LLC, scheduled to close in the first quarter of 2025.
The purchase includes a 270 MMcf/d processing facility and a 104-mile pipeline in the Williston Basin. Moreover, Kinder Morgan's subsidiary, Tennessee Gas Pipeline, is proceeding with the $1.4 billion Mississippi Crossing Project, expected to be operational by November 2028.
In analyst updates, Kinder Morgan received target price upgrades from Citi, RBC Capital Markets, and Goldman Sachs, all noting the company's potential for major expansion projects and growth in natural gas demand. Meanwhile, Phillips 66 (NYSE:PSX) is selling its 25% non-operated equity interest in the Gulf Coast Express Pipeline to an affiliate of ArcLight Capital Partners (WA:CPAP), LLC for $865 million, with the transaction expected to close in January 2025.
These are among the recent developments for both Kinder Morgan and Phillips 66. It's important to note that these recent events do not indicate future performance and are subject to market conditions and risks.
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