Is Kinder Morgan Worth $18?

Credit Suisse analysts John Edwards and Bhavesh Lodaya reiterated a Neutral rating and $18.00 price target on shares of Kinder Morgan Inc KMI on Wednesday.

The big cap energy and energy infrastructure company reported earnings of $0.22 per share, beating the Street’s consensus of $0.17 per share, after the market closed on Wednesday.

However, revenue of $3.636 billion fell short of expectations for $3.808 billion in sales.

Kinder Morgan reported its fourth quarter fiscal 2015 financial results on Wednesday afternoon, slightly beating Credit Suisse’s estimates. However, what really surprised the analysts was the ~20 percent reduction in the preliminary 2016 capital budget.

Related Link: Kinder Morgan Shares Up After Conference Call; Analyst Said Management Tone 'OK' Despite Tough Macro Environment

While the experts see a cut as understandable, given that we are in a $20-$40/bbl crude oil world, the magnitude of the drop caught them off guard. Moreover, they noted, as a sector bellwether, Kinder Morgan’s actions have implications for many of its peers. In fact, 2016 capital numbers are likely to tumble across the sector.

On the bright side, nonetheless, the company will fund all of its growth from cash generated internally. Thus, the analysts continue to envision “further de-levering of the balance sheet by 0.1x to 5.5x debt/EBITDA by YE2016.”

Actually, they declared to be “holding off on significant model/estimate revisions until KMI's analyst day next week.” Consequently, they reiterated a Neutral rating and $18.00 price target on the stock.

Disclosure: Javier Hasse holds no positions in any of the securities mentioned above.