Kinder Morgan Inc., which is the nation’s largest natural gas pipeline operator, is poised to take advantage of growth opportunities after completing a $20 billion acquisition of El Paso Corp., a Citi Research analyst said Friday.
Analyst John K. Tysseland raised his rating on Kinder Morgan to “Buy” from “Neutral/High Risk” and increased the share price target to $39 from $32. The stock was trading at above $34 at midday Friday.
He also raised per-share earnings estimates to $1.10 from 97 cents for 2012 and to $1.35 from $1.16 for 2013. Analysts polled by FactSet, on average, predicted 2012 earnings of $1.05 per share and 2013 earnings of $1.29 per share.
Kinder Morgan completed its acquisition of El Paso Corp. in May. The Houston company expects the deal to result in annual savings of more than $400 million.
In addition, managers want to align the company more closely with producers in low-cost areas of development, Tysseland wrote in a research note. He also expects Kinder Morgan to seek out new large-scale expansion projects.
Kinder Morgan should achieve a dividend growth rate of 12.5 percent, he said. Kinder Morgan appears undervalued because it has underperformed since March due to short-term technical reasons and investor concerns about future pipeline contracts and a drop in oil prices, he said.
Tysseland also raised his rating on Kinder Morgan Energy Partners LP to “Neutral” from “Sell” and the share price target to $82 from $78.
He lowered the per-share earnings estimate to $2.11 from $2.22 for 2012 and raised the estimate to $2.22 from $2 for 2013. Analysts have forecast earnings of $2.31 per share for 2012 and $2.52 per share for 2013.
Kinder Morgan owns the general partner and limited partner interests in Kinder Morgan Energy Partners and El Paso Pipeline Partners LP.
In midday trading, shares of Kinder Morgan rose 94 cents, or 2.8 percent, to $34.28; Kinder Morgan Energy Partners gained 75 cents to $84.21. El Paso Pipeline shares fell 19 cents to $34.05.
