Energy Transfer LP Unit (ET) & Kinder Morgan (KMI) Critical Review

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Energy Transfer LP Unit (NYSE:ET) and Kinder Morgan (NYSE:KMI) are both large-cap oils/energy companies, but which is the superior business? We will contrast the two businesses based on the strength of their institutional ownership, valuation, profitability, risk, dividends, earnings and analyst recommendations.

Dividends

Energy Transfer LP Unit pays an annual dividend of $1.22 per share and has a dividend yield of 8.4%. Kinder Morgan pays an annual dividend of $0.80 per share and has a dividend yield of 4.4%. Energy Transfer LP Unit pays out 100.8% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Kinder Morgan pays out 89.9% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future.

Insider and Institutional Ownership

47.0% of Energy Transfer LP Unit shares are owned by institutional investors. Comparatively, 61.5% of Kinder Morgan shares are owned by institutional investors. 3.3% of Energy Transfer LP Unit shares are owned by insiders. Comparatively, 14.2% of Kinder Morgan shares are owned by insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a stock will outperform the market over the long term.

Valuation and Earnings

This table compares Energy Transfer LP Unit and Kinder Morgan’s gross revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Energy Transfer LP Unit $40.52 billion 0.42 $915.00 million $1.21 12.04
Kinder Morgan $14.14 billion 2.81 $183.00 million $0.89 20.24

Energy Transfer LP Unit has higher revenue and earnings than Kinder Morgan. Energy Transfer LP Unit is trading at a lower price-to-earnings ratio than Kinder Morgan, indicating that it is currently the more affordable of the two stocks.

Analyst Ratings

This is a summary of current ratings and price targets for Energy Transfer LP Unit and Kinder Morgan, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Energy Transfer LP Unit 0 0 4 0 3.00
Kinder Morgan 1 0 17 1 2.95

Energy Transfer LP Unit presently has a consensus target price of $19.67, suggesting a potential upside of 34.98%. Kinder Morgan has a consensus target price of $21.01, suggesting a potential upside of 16.67%. Given Energy Transfer LP Unit’s stronger consensus rating and higher possible upside, equities analysts plainly believe Energy Transfer LP Unit is more favorable than Kinder Morgan.

Volatility and Risk

Energy Transfer LP Unit has a beta of 1.71, meaning that its stock price is 71% more volatile than the S&P 500. Comparatively, Kinder Morgan has a beta of 0.73, meaning that its stock price is 27% less volatile than the S&P 500.

Profitability

This table compares Energy Transfer LP Unit and Kinder Morgan’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Energy Transfer LP Unit 2.58% 5.68% 1.98%
Kinder Morgan 11.38% 5.84% 2.59%

Summary

Kinder Morgan beats Energy Transfer LP Unit on 10 of the 17 factors compared between the two stocks.

Energy Transfer LP Unit Company Profile

Energy Transfer LP provides diversified energy-related services in the United States. It owns and operates approximately 7,900 miles of natural gas transportation pipelines and three natural gas storage facilities in Texas; and approximately 11,800 miles of interstate natural gas pipelines. The company sells natural gas to electric utilities, independent power plants, local distribution companies, industrial end-users, and other marketing companies. It owns and operates natural gas and natural gas liquid (NGL) gathering pipelines, as well as natural gas processing plants, treating facilities, and conditioning facilities in Texas, New Mexico, West Virginia, Pennsylvania, and Louisiana; natural gas gathering, oil pipeline, and oil stabilization facilities in South Texas; a natural gas gathering system in Ohio; and transportation and supply of water to natural gas producers in Pennsylvania. The company also owns approximately 4,300 miles of NGL pipelines, 5 NGL and propane fractionation facilities, and NGL storage facilities with aggregate working storage capacity of approximately 53 million barrels. It also sells gasoline, middle distillates, and motor fuel at retail, as well as crude oil, NGLs, and refined products; operates convenience stores; and distributes motor fuels and other petroleum products. The company provides natural gas compression services; treating services, such as carbon dioxide and hydrogen sulfide removal, natural gas cooling, dehydration, and British thermal unit management services; and manages coal and natural resources properties, as well as sells standing timber, leases coal-related infrastructure facilities, collects oil and gas royalties, and generates a total of 75 megawatts electrical power. The company was formerly known as Energy Transfer Equity, L.P. and changed its name to Energy Transfer LP in October 2018. The company was founded in 2002 and is based in Dallas, Texas.

Kinder Morgan Company Profile

Kinder Morgan, Inc. operates as an energy infrastructure company in North America. It operates through Natural Gas Pipelines, CO2, Terminals, Products Pipelines, and Kinder Morgan Canada segments. The Natural Gas Pipelines segment owns and operates interstate and intrastate natural gas pipeline and storage systems; natural gas and crude oil gathering systems, and natural gas processing and treating facilities; natural gas liquids (NGL) fractionation facilities and transportation systems; and liquefied natural gas facilities. The CO2 segment produces, transports, and markets CO2 for recovering crude oil from mature oil fields; and owns interests in/or operates oil fields and gas processing plants, as well as operates a crude oil pipeline system in West Texas. The Terminals segment owns and operates liquids and bulk terminals that transload and store refined petroleum products, crude oil, chemicals, and ethanol, as well as bulk products, including coke, steel, and coal; and owns tankers. The Products Pipelines segment owns and operates refined petroleum products, NGL, and crude oil and condensate pipelines; and associated product terminals and petroleum pipeline transmix facilities. The Kinder Morgan Canada segment owns and operates Trans Mountain pipeline system that transports crude oil and refined petroleum products from Edmonton, Alberta, and Canada to marketing terminals and refineries in British Columbia, Canada, and the state of Washington; and Jet Fuel aviation turbine fuel pipeline that serves the Vancouver (Canada) International Airport. As of February 5, 2018, Kinder Morgan, Inc. owns or operates approximately 85,000 miles of pipelines and 152 terminals. The company was formerly known as Kinder Morgan Holdco LLC and changed its name to Kinder Morgan, Inc. in February 2011. Kinder Morgan, Inc. was founded in 1936 and is headquartered in Houston, Texas.

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