KMI - Embedded Expectations Analysis - 2021 02 25
Kinder Morgan, Inc. (KMI:USA) currently trades near corporate averages relative to UAFRS-based (Uniform) earnings with a 20.0x Uniform P/E. At these levels, the market is pricing in bullish expectations for the firm, but management may be concerned about EBITDA declines, Kinderhawk and tanker performance, and their renewable diesel businessSpecifically, management may lack confidence in their ability to mitigate EBITDA declines, continue managing ESG risk, and sustain their capital investments. Moreover, they may be concerned about the performance of Kinderhawk and they may be exaggerating the potential of their renewable diesel business and the benefits of the centralization of business functions. Furthermore, they may lack confidence in their ability to penetrate the renewable market in California and mitigate the impact of the negative performance of their Lone Star and Pelican vessels. In addition, they may have concerns about weak demand in California, overall gas volume trends, and their carbon capture opportunities
Kinder Morgan is an energy infrastructure company. The company's segments are: Natural Gas Pipelines, which includes the ownership and operation of, among others, main interstate and intrastate natural gas pipeline and storage systems; Products Pipelines, which includes the refined petroleum products, crude oil and condensate pipelines; Terminals, which includes the ownership and/or operation of, among others, liquids and bulk terminal facilities; and carbon dioxide (CO2), which includes the production, transportation and marketing of CO2, ownership interests in and/or operation of oil fields and gasoline processing plants in West Texas.
In 2009, just as the dust was settling from the last major equity and credit market crises, we launched a boutique research firm with the intention of breaking Wall Street’s biases and broken incentives:
- GAAP and IFRS have failed to provide rules for reliable financial statement reporting
- Stock analyst recommendations are not grounded in disciplined financial analysis
- Credit agencies have been set up to grossly fail in their responsibilities to investors and the public markets
- Utter lack of willingness of major research firms to employ the the most advanced forensic analysis available
We sought to provide investors and company analysts with a source of information that changed all that.
Many years later, our business model remains because little has changed on Wall Street.
- Corporate credit ratings remain years behind the fundamental underpinnings of company performance
- Stock analysts continue to make recommendations with deeply inherent biases
- Research firms have failed to break down the walls between credit, equity, and macroeconomic research
- The governing accounting bodies have created more leeway for mis-estimates and mis-classifications as financials have become unwieldy and overwhelming
The integrity of Valens Research is founded in our disciplined processes and analytics. No “star” analysts. No corporate advisory relationships. No-nonsense opinions and recommendations.
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