Contrasting Kinder Morgan (KMI) and Targa Resources (TRGP)

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Kinder Morgan (NYSE:KMI) and Targa Resources (NYSE:TRGP) are both large-cap oils/energy companies, but which is the better business? We will compare the two businesses based on the strength of their analyst recommendations, valuation, profitability, risk, dividends, earnings and institutional ownership.

Risk & Volatility

Kinder Morgan has a beta of 0.73, indicating that its stock price is 27% less volatile than the S&P 500. Comparatively, Targa Resources has a beta of 2.08, indicating that its stock price is 108% more volatile than the S&P 500.

Profitability

This table compares Kinder Morgan and Targa Resources’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Kinder Morgan 0.78% 5.51% 2.45%
Targa Resources 2.24% 1.62% 0.76%

Dividends

Kinder Morgan pays an annual dividend of $0.80 per share and has a dividend yield of 4.9%. Targa Resources pays an annual dividend of $3.64 per share and has a dividend yield of 7.3%. Kinder Morgan pays out 121.2% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Targa Resources pays out -846.5% of its earnings in the form of a dividend. Targa Resources is clearly the better dividend stock, given its higher yield and lower payout ratio.

Earnings and Valuation

This table compares Kinder Morgan and Targa Resources’ revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Kinder Morgan $13.71 billion 2.64 $183.00 million $0.66 24.89
Targa Resources $8.81 billion 1.27 $54.00 million ($0.43) -115.63

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

Insider & Institutional Ownership

60.4% of Kinder Morgan shares are held by institutional investors. Comparatively, 92.0% of Targa Resources shares are held by institutional investors. 14.2% of Kinder Morgan shares are held by company insiders. Comparatively, 1.8% of Targa Resources shares are held by company insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a company will outperform the market over the long term.

Analyst Recommendations

This is a summary of current ratings and target prices for Kinder Morgan and Targa Resources, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Kinder Morgan 0 2 15 1 2.94
Targa Resources 0 7 10 1 2.67

Kinder Morgan currently has a consensus target price of $20.78, suggesting a potential upside of 26.14%. Targa Resources has a consensus target price of $58.28, suggesting a potential upside of 17.21%. Given Kinder Morgan’s stronger consensus rating and higher possible upside, equities analysts plainly believe Kinder Morgan is more favorable than Targa Resources.

Summary

Kinder Morgan beats Targa Resources on 11 of the 16 factors compared between the two stocks.

About Kinder Morgan

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.

About Targa Resources

Targa Resources Corp., together with its subsidiary, Targa Resources Partners LP, owns, operates, acquires, and develops a portfolio of midstream energy assets in North America. It operates in two segments, Gathering and Processing, and Logistics and Marketing. The company engages in gathering, compressing, treating, processing, and selling natural gas; storing, fractionating, treating, transporting, and selling natural gas liquids (NGL) and NGL products, including services to liquefied petroleum gas exporters; gathering, storing, terminaling, and selling crude oil; and storing, terminaling, and selling refined petroleum products. It is also involved in the purchase and resale of NGL products; and wholesale of propane, as well as provision of related logistics services to multi-state retailers, independent retailers, and other end-users. In addition, the company offers NGL balancing services; and transportation services to refineries and petrochemical companies in the Gulf Coast area, as well as purchases, markets, and resells natural gas. The company operates approximately 27,000 miles of natural gas pipelines, including 37 owned and operated processing plants; and owns or operates a total of 39 storage wells with a gross storage capacity of approximately 69 million barrels. As of December 31, 2017, it leased and managed approximately 640 railcars; 130 transport tractors; and 18 company-owned pressurized NGL barges. The company was founded in 2005 and is headquartered in Houston, Texas.

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