Kinder Morgan, Inc.
If you take the time and read through the company’s FY17 10-K, you come to understand the amount of asset acquisition and asset sales the company performs really is a lot. In addition to those business additions and reductions when you consider that the company is also apart of 20 joint ventures you realize that coming up with a reasonable fair value estimate for the stock is a daunting task.
One of the things that does fit, and will always fit is earnings, and y-o-y, the company’s earnings were down roughly 40%. Sales during the period did increase 5%, but free cash flow fell 35% along with debt which fell 6%. Things like this always puzzle me. I mean here’s a company that during FY15 and FY16 spent almost $3.6B on acquisitions only to see future earnings decline? It just makes we wonder if anybody at all understands the complex finance and legalese that are apart of the numerous business arrangements and combinations the company is involved with. Of course maybe, just like Congress, nobody is bothering to read through the deals.
So what’s this deal? My short-term (3-6 week hold) target price for the stock is $19.79, with an initial trailing stop at $17.04. My current future target price for the stock (a 5 year hold) is $20, which is an average annual return of 4%. A prior five year hold of the stock would have returned an average of (-9%) per year. As is always the case, please keep in mind that any investment has the potential for loss and that past performance is no guarantee of future results.
Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.