Kinder Morgan No Longer A Buy, Says Argus

• Kinder Morgan Inc KMI shares are down 34 percent in the last three months, and are trading at the lower end of their 52-week range of $20.39 - $44.71.
• Argus analyst Jim Kelleher downgraded the rating on the company from Buy to Hold.
• There are ongoing investor concerns over dividends, several earnings misses, and the company’s ability to fund its five-year project backlog, Kelleher mentioned.

Kinder Morgan’s shares could decline further on account of ongoing investor concerns regarding the company lowering its dividend growth guidance, repeated earnings misses, and the company’s ability to finance its five-year, $21.3 billion project backlog, analyst Jim Kelleher noted.

Moreover, Moody’s has downgraded its credit rating on Kinder Morgan to one notch above junk status and lowered its outlook from “stable” to “negative.”

“Kinder Morgan’s business environment has become increasingly challenging in recent months.” Kelleher wrote. In the early part of 2015, the company formed a C-corp with the intention of consolidating its various entities, and thereafter using this highly valued equity as currency to acquire other midstream companies.

Kinder Morgan indicated that it is indifferent to the price of energy products. The analyst pointed out, however, that the company’s assets were being impacted by the tough industry environment. Recently, the company stated plans to increase its stake in Natural Gas Pipeline Co. of America, NGPL, from 20 percent to 50 percent. Moody’s cited this in its rating downgrade decision.

“Management’s plan for a convertible preferred equity offering is designed to provide adequate financing without endangering the company’s investment-grade credit rating or excessively diluting existing shareholders. Nonetheless, investors perceive the convertible as a new financing vehicle for a company already carrying a heavy debt load,” Kelleher added.