Kinder Morgan (KMI) has tabled a $1.225 billion acquisition bid for Stagecoach Gas Services, a unit owned jointly by Consolidated Edison (ED) and Crestwood Equity (CEQP). The transaction should close in the third quarter, subject to regulatory approval under the Hart-Scott-Rodino Act.
The unit that Kinder Morgan is acquiring consists of 4 storage facilities for the natural gas pipeline network. The purchase bid represents about ten times Stagecoach’s 2020 EBITDA. The acquisition should allow Kinder Morgan to enhance service delivery to customers in the Northeast market. (See Kinder Morgan stock analysis on TipRanks).
“These natural gas pipeline and storage facilities help connect natural gas supply sources and Northeast demand areas. Natural gas has long been responsible for providing heat and hot water to homes and businesses in the Northeast, and it now has an increasingly vital role as a reliable, low emissions partner backing up growing renewable power generation,” said Kimberly Watson, KMI’s head of Interstate Natural Gas Pipelines. (See Crestwood Equity stock analysis on TipRanks).
Last week, Morgan Stanley analyst Devin McDermott downgraded Kinder Morgan to a Sell citing near-term pandemic headwinds.
“Model adjustments to reflect temporary Winter Storm Uri benefits and certain near-term pandemic headwinds (weaker refined product volumes, lower Jones Act tanker renewal rates) largely wash out from a valuation perspective and unchanged resulting DCF fair value screens more consistent with the Underweight grouping,” McDermott stated.
The analyst has a price target of $18 on the stock, implying 2.76% downside potential to current levels.
Consensus among analysts on Wall Street is a Hold based on 1 Buy, 7 Hold, and 2 Sell ratings. The average analyst price target of $17.44 implies 5.78% downside potential to current levels.
KMI scores a 5 out of 10 on TipRanks’ Smart Score rating system, suggesting that the stock is likely to perform in line with market averages.