Kinder Morgan Surpasses Industry Gains: What Investors Should Know

Globe and Mail

a day ago

Shares of Kinder Morgan, Inc. KMI have gained 45.4% in the past year, outperforming the oil-energy sector's gain of 26.5% and the S&P 500's gain of 11.3%. The company has a market capitalization of $63 billion.
The company also outperformed its peers, such as MPLX LP MPLX and Enbridge, Inc. ENB, which have gained 20.3% and 26.7%, respectively, over the same time frame.
Positive Outlook on KMI's Growth Trajectory
The Zacks Consensus Estimate for KMI's 2025 earnings is pegged at $1.26, implying a year-over-year improvement of 9.6%. The consensus estimate for KMI's 2025 revenues is pegged at $16.5 billion, implying a year-over-year improvement of 9.4%.
Kinder Morgan's earnings grew 4.9% in the last five years, better than the industry average of 4.4%. Long-term earnings growth is expected to be 7.2%, better than the industry average of 6.7%.
Average Target Price for KMI Suggests Upside
Based on short-term price targets offered by 15 analysts, the Zacks average price target is $31.40 per share. The average suggests a 10.9% upside from the last closing price.
Factors to Consider
Kinder Morgan presents a compelling investment case grounded in stable cash flows, strategic natural gas infrastructure, and forward-looking capital deployment. At the core of its financial model is a highly predictable earnings stream, approximately 95% of its 2025 budgeted cash flow comes from take-or-pay, fee-based, or hedged contracts. This structure protects the company against commodity price volatility and volume fluctuations.
The take-or-pay model, which accounts for 64% of the total, ensures payment from counterparties regardless of actual throughput, while the fee-based and hedged arrangements further stabilize revenue. This setup supports Kinder Morgan's robust 2025 financial guidance of $5.2 billion in distributable cash flow and $1.27 billion in adjusted earnings per share, indicating 10% and 4% year-over-year growth in EPS and EBITDA, respectively.
Strategically, Kinder Morgan is deeply embedded in the U.S. natural gas market, which is projected to experience significant growth through the end of the decade. Demand is expected to rise by 20-28 billion cubic feet per day (bcfd) by 2030, largely driven by LNG exports, power generation needs (especially as coal retires), and increased industrial usage. The company is positioned to benefit directly from this surge, with long-term contracts already in place. Kinder Morgan's footprint is particularly strong in Texas and Louisiana, regions anticipated to account for over 95% of total U.S. demand growth in this timeframe.
The company's dominant position in natural gas transportation is a key differentiator. Kinder Morgan owns and operates 66,000 miles of natural gas pipelines, which move around 40% of U.S. production. It also controls over 700 billion cubic feet of working storage, accounting for 15% of national capacity. The scale of this infrastructure not only supports efficient delivery to high-demand markets, including power plants and export terminals, but also provides operational leverage and competitive moat advantages.
Kinder Morgan is also actively participating in the broader energy transition. Through its Energy Transition Ventures group, it is building a portfolio of renewable natural gas (RNG) assets with 6.4 bcf of annual production capacity and is evaluating carbon capture and storage (CCS) opportunities. These investments leverage its existing pipeline expertise and position it to serve emerging low-carbon markets. Furthermore, approximately $8 billion of its current capital project backlog includes components related to lower-carbon initiatives such as RNG and CCS.
Lastly, the company has demonstrated a strong commitment to sustainability and governance. It received an MSCI ESG rating upgrade to AAA in 2024 and ranks among the top performers in its industry according to Sustainalytics, FTSE, and Refinitiv. Operationally, it has achieved an ~8% reduction in methane emissions since 2021 and surveys 100% of its natural gas compressor stations every quarter. These practices, alongside improved board diversity and employee safety metrics, reinforce Kinder Morgan's positioning as a responsible infrastructure operator.
Risks
One key risk factor for Kinder Morgan is its partial exposure to commodity price volatility, particularly within its Enhanced Oil Recovery (EOR) operations and certain natural gas Gathering & Processing (G&P) projects. While 95% of KMI's cash flows are secured through take-or-pay, fee-based, or hedged structures, around 5% remain unhedged, making them sensitive to market fluctuations. The EOR segment, in particular, generates revenue based on oil prices and production volumes, which can lead to earnings variability during periods of commodity price weakness.
Hence, it is better to stay cautious about this Zacks Rank #3 (Hold) stock. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.
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