It is not unusual at all to see big moves in share prices after earnings reports and other key news releases. It is also not that uncommon to see analysts become more positive or more negative about those companies depending on the bias of the news. Now we have seen many analysts become less negative and even outright positive on many companies in the energy sector. Perhaps the real issue to wonder is whether there remains serious upside for the oil patch ahead of if the recovery in those stocks has already priced in a recovery.
24/7 Wall St. tracked two key earnings reports in the oil patch, and they have been followed by positive analyst calls. Kinder Morgan Inc. (NYSE: KMI) has traded up after its earnings managed to beat expectations. Halliburton Company (NYSE: HAL) has also seen gains, but on a more muted basis.
What stands out here is that the pool of analysts covering each energy giant here have been more positive than cautious on Thursday. Investors should also take notice that these positive calls and upgrades are also being seen after a significant price recovery from the lows of 2015 and early 2016.
Kinder Morgan shares were seen trading up 2.2% at $21.17 in mid-day trading on Thursday, almost 100% higher than its 52-week low of $11.20 but still well under a 52-week high of $31.42. Kinder Morgan’s consensus analyst price target is now $24.21. Halliburton’s stock price was last seen trading up 4-cents at $49.11 after having been up over 1% earlier in the morning. Halliburton’s 52-week trading range is $27.64 to $50.23, and its consensus analyst price target is now $54.98.
24/7 Wall St. has tracked numerous analyst calls for each company. Some are actual ratings upgrades and some are mere upticks in the price targets and/or earnings estimates.
On Kinder Morgan, Stifel Nicolaus raised its rating to Buy from Hold and they issued a $24.00 price target. Kinder Morgan was also raised to Outperform from Peer Perform at a firm called Wolfe Research. SunTrust Robinson Humphrey maintained its Buy rating and raised its target price to $26.00 from $25.00.
Credit Suisse raised its Kinder Morgan rating to Outperform from Neutral and raised its target to $26.00 from $23.00 in the call. What should stand out here is that Credit Suisse upgraded Kinder Morgan earlier in 2016 when shares were much lower and then it adjusted its Outperform rating down to Neutral after shares had recovered. At one point, Credit Suisse had said that the worst was behind it. Now Credit Suisse sees a likely mid-2018 dividend increase and they were interested again after its recent share price retreat.
In an effort to show both sides of the coin, we noticed that Jefferies merely reiterated its Hold rating on Kinder Morgan. It also made no change to the $22.00 price target. Their report said:
While we remain cautious regarding project returns & the depth of expansion inventory, we applaud management for putting the company on a stable de-levering glide path and believe leverage targets will be achieved in early 2018.
BofA Merrill Lynch maintained its Neutral rating and maintained its$24.00 price objective on Kinder Morgan. Its report said:
Kinder Morgan reported third quarter adjusted EBITDA of $1.77 billion, in-line with the BofAML/consensus estimate of $1.75 billion. Management highlighted TMX as a potential joint venture candidate and looks to continue self-funding growth after potentially increasing DPS. We reiterate our $24 PO based on a target 2017 EV/EBITDA of 12.5x.