Goldman answers pushback on Kinder Morgan upgrade, reiterates bullish view

|About: Kinder Morgan, Inc. (KMI)|By:, SA News Editor

Goldman Sachs reiterates its bullish stance on Kinder Morgan (KMI, KMP) in a response to pushback from some investors after last week's upgrade to Conviction Buy.

Bearish investors point out that KMI is not a pure play on Marcellus/Utica infrastructure growth, but the firm believes KMI's announced and potential incremental projects can add meaningfully to cash flow and backlog growth; with gas infrastructure coming increasingly into focus, KMI should benefit from growth in Appalachia and across the continent at strong returns.

On financial flexibility, KMI should manage coverage given its highly fee-based and hedged cash flow profile; on maintenance capex, Goldman admits Kinder spends a relatively low amount on E&P, but E&P represents only ~15% of cash flows and generates strong returns, and sees midstream maintenance as appropriate.