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

Being a leading North American midstream energy player, Kinder Morgan (KMI) has the continent's largest natural gas transportation network.

This story originally appeared on Zacks

Kinder Morgan, Inc. KMI has seen upward estimate revisions for 2022 earnings in the past 30 days. Also, the Zacks Consensus Estimate for earnings for 2021 is pegged at $1.32 per share, suggesting a year-over-year improvement of 50%.

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What’s Favoring the Stock?

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

Being a transporter of 1.7 million barrels per day (MMB/D) of refined products through its pipeline network spreading across 6,800 miles, Kinder Morgan is the largest independent transporter of refined products in North America. It also has an operating interest in 144 terminals.

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

Kinder Morgan is firmly focused on returning capital to shareholders. In its recently unveiled 2022 financial projections, the annual dividend for next year is at $1.11 per share. KMI also expects to repurchase up to $750 million of shares next year.

Factors Deterring the Stock

Kinder Morgan’s backlog was reported $1.6 billion as of the September quarter of 2021, significantly lower than the high of $22 billion reached in mid-2015. Kinder Morgan lost a 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 PDC Energy, Inc. PDCE, Sunoco LP SUN and SM Energy SM. All the stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

PDC Energy is focusing on significant value creation with a strong presence in the Delaware Basin – a sub-basin of Permian – where the company’s operations spread across roughly 25,000 net acres. PDC Energy has done pretty well this year despite the coronavirus pandemic and is projecting 2021 free cash flow of more than $900 million.

PDC Energy also focuses on debt reduction. To strengthen its balance sheet, PDC Energy anticipates reducing its debt load by more than 40% in 2021.

Sunoco LP generates stable cash flows since it is a leading independent fuel distributor in the United States. Sunoco LP secures roughly 2,500 commercial customers with a growing energy infrastructure platform.

Over the past 60 days, Sunoco LP has witnessed upward earnings estimate revisions for 2021 and 2022. Overall, with demand for traditional motor fuels to remain in place, Sunoco LP is well placed to continue generating stable cash flows.

SM Energy is also a leading upstream player with a strong top-tier assets footprint. SM Energy is delivering the best-in-class well performances. Since the beginning of 2021 to the third quarter-end, SM Energy has completed 78 net wells with the projection for the completion of 82 net wells.

Over the past seven days, SM Energy has witnessed upward earnings estimate revisions for 2021. So far this year, SM Energy has gained 373.9%, outpacing the surge of 98.7% of the composite stocks belonging to the industry.

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