Analyzing Shell Midstream Partners (SHLX) & Kinder Morgan (KMI)

Shell Midstream Partners (NYSE: SHLX) and Kinder Morgan (NYSE:KMI) are both mid-cap oils/energy companies, but which is the better investment? We will compare the two businesses based on the strength of their risk, dividends, valuation, analyst recommendations, institutional ownership, profitability and earnings.

Volatility & Risk

Shell Midstream Partners has a beta of 1.16, meaning that its stock price is 16% more volatile than the S&P 500. Comparatively, Kinder Morgan has a beta of 0.62, meaning that its stock price is 38% less volatile than the S&P 500.

Dividends

Shell Midstream Partners pays an annual dividend of $1.27 per share and has a dividend yield of 4.2%. Kinder Morgan pays an annual dividend of $0.50 per share and has a dividend yield of 2.6%. Shell Midstream Partners pays out 100.0% 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 89.3% 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 has increased its dividend for 2 consecutive years.

Earnings and Valuation

This table compares Shell Midstream Partners and Kinder Morgan’s gross revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Shell Midstream Partners $291.30 million 19.58 $244.90 million $1.27 23.92
Kinder Morgan $13.06 billion 3.25 $708.00 million $0.56 33.95

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

Profitability

This table compares Shell Midstream Partners and Kinder Morgan’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Shell Midstream Partners 85.14% 3,826.80% 27.98%
Kinder Morgan 10.39% 4.33% 1.93%

Analyst Ratings

This is a breakdown of current recommendations for Shell Midstream Partners and Kinder Morgan, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Shell Midstream Partners 0 2 5 0 2.71
Kinder Morgan 0 8 9 0 2.53

Shell Midstream Partners presently has a consensus target price of $33.71, indicating a potential upside of 10.98%. Kinder Morgan has a consensus target price of $23.00, indicating a potential upside of 20.99%. Given Kinder Morgan’s higher probable upside, analysts plainly believe Kinder Morgan is more favorable than Shell Midstream Partners.

Insider & Institutional Ownership

53.0% of Shell Midstream Partners shares are held by institutional investors. Comparatively, 60.7% of Kinder Morgan shares are held by institutional investors. 14.0% of Kinder Morgan shares are held by insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a stock is poised for long-term growth.

Summary

Kinder Morgan beats Shell Midstream Partners on 9 of the 17 factors compared between the two stocks.

About Shell Midstream Partners

Shell Midstream Partners, L.P. is a master limited partnership company, which owns, operates, develops and acquires pipelines and other midstream assets. The Company conducts its operations through its subsidiary, Shell Midstream Operating, LLC. Its assets consist of interests in entities that own crude oil and refined products pipelines serving as key infrastructure to transport onshore and offshore crude oil production to Gulf Coast and Midwest refining markets and to deliver refined products from those markets to demand centers. As of December 31, 2016, it owned interests in seven crude oil pipeline systems, three refined products systems, one natural gas gathering pipeline system and a crude tank storage and terminal system. Its pipeline and terminal systems include Zydeco crude oil system, Auger crude oil system, Mars crude oil system, Bengal product system, Poseidon crude oil system, Odyssey crude oil system, Proteus crude oil system and Endymion crude oil system.

About Kinder Morgan

Kinder Morgan, Inc. is an energy infrastructure company. It operates through five segments. Its Natural Gas Pipelines segment is engaged in the ownership and operation of interstate and intrastate natural gas pipeline and storage systems, and liquefied natural gas facilities, among others. Its CO2 segment is engaged in the production, transportation and marketing of carbon dioxide (CO2) to oil fields and the ownership and operation of a crude oil pipeline system, among others. Its Terminals segment is engaged in the ownership and/or operation of liquids and bulk terminal facilities located throughout the United States and portions of Canada, and Jones Act tankers. Its Products Pipelines segment is engaged in the ownership and operation of refined petroleum products, natural gas liquids and crude oil and condensate pipelines. Its Kinder Morgan Canada segment is engaged in the ownership and operation of the Trans Mountain pipeline system and Jet Fuel aviation turbine fuel pipeline.

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