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Kinder Morgan Poised To Benefit From Rising Natural Gas, Power Demand, RBC Says

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Kinder Morgan Poised To Benefit From Rising Natural Gas, Power Demand, RBC Says

Kinder Morgan (KMI) is favorably positioned to benefit from rising demand for natural gas and power, RBC Capital Markets said in a note, adding that the company is likely to beat Wall Street expectations for the fiscal second quarter.

RBC increased its adjusted earnings before interest, taxes, depreciation, and amortization forecast for the second quarter to $2.05 billion from $2.01 billion amid higher-than-expected oil prices, benefits from the company's carbon dioxide business, and the inclusion of the Monument acquisition. The FactSet-polled consensus is at $2.06 billion.

In April, Kinder Morgan said it agreed to acquire Monument Pipeline, a natural gas pipeline system serving Houston and the surrounding metropolitan area, for $505 million in cash.

RBC also highlighted Kinder Morgan's growing backlog and said the company remains confident in its ability to sanction a material portion of its shadow backlog this year. Kinder Morgan's project backlog in the first quarter rose by $145 million sequentially to $10.1 billion, it said in April.

"Heading into earnings, we see more potential to beat expectations vs miss especially given the macro

backdrop (increased exports across the docks, commodity price tailwinds)," RBC analyst Elvira Scotto wrote in the note emailed Friday.

The energy infrastructure company is expected to report second-quarter results next month.

RBC said the Gulf Coast Express pipeline expansion is expected to come online in June, while the South System Expansion 4 and the Mississippi Crossing pipeline are on track to receive approval from the Federal Energy Regulatory Commission by the end of July, after which construction is expected to begin.

The brokerage maintained its Sector Perform rating on the stock, with a price target of $35.

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