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Price: $30.57
Discount category: Close to intrinsic value
Next earnings: 2027-01-21
Next earnings is estimate: Yes
Company name: Kinder Morgan
Sector: Natural gas pipelines and energy infrastructure
About: Kinder Morgan is one of the largest energy infrastructure companies in North America. It owns an interest in or operates about 78,000 miles of pipelines, more than 130 terminals and more than 700 Bcf of working natural gas storage capacity. It has four business segments. Natural Gas Pipelines moves and stores natural gas, and it delivers more than 40% of the natural gas that U.S. LNG export plants use. It gives most of the earnings. Products Pipelines moves gasoline, diesel, jet fuel and crude oil. Terminals stores and handles liquids and bulk products such as petroleum coke and metals, and it has a fleet of Jones Act tankers. CO2 produces oil with enhanced oil recovery and sells CO2 and renewable natural gas. In Q3 2026, Natural Gas Pipelines gave $1,489 million of Adjusted Segment EBDA. Kinder Morgan is a corporation, not a partnership, and its Class P common stock trades on the New York Stock Exchange. It had 11,028 full-time employees at December 31, 2025. The head office is in Houston, Texas. Kim Dang is Chief Executive Officer, and Richard D. Kinder is Executive Chairman.
Thesis: Kinder Morgan trades close to its intrinsic value because investors pay a full price for its stable, fee-based cash flow and its growth from natural gas demand, but they weigh its high debt and its large new projects. In Q3 2026, Adjusted EBITDA rose 9% to $2.18 billion and Adjusted EPS rose 21% to $0.35. The project backlog rose to $14.4 billion, including $13.2 billion for natural gas, and Kinder Morgan expects 2026 Adjusted EPS to beat its budget of $1.36 by more than 13%. For the value to grow, three things must be true. New pipelines, such as the Southeast Connector and the Permian Link, must get their permits and start service on time in 2030. The expected first-full-year Project EBITDA multiple of about 5.7 times on the backlog must hold. The ratio of net debt to Adjusted EBITDA must stay near 3.5 to 3.8 times while capital spending rises. The Q4 2026 report and the 2027 budget, expected in late January 2027, are the next tests. If the projects stay on time and on budget, the value can grow with the cash flow over several years.
Risks: Debt was $33.2 billion at September 30, 2026. Higher interest rates raise the cost of new debt, and the large project backlog needs more capital spending. Large new pipelines need federal and state permits. Delays, legal challenges or cost overruns can lower the returns of the projects that are planned for 2029 and 2030. Some earnings move with commodity prices, mainly in the CO2 segment, in gathering and in products volumes. Crude and condensate volumes fell 11% in Q3 2026. Products Pipelines recorded $138 million of legal, environmental and other accruals in Q3 2026. Pipeline leaks, fines and lawsuits can cause more costs.
Balance sheet: Cash: $918M Debt: $33.2B Net debt: $32.2B EBITDA, last 12 months: $9.2B Net debt / EBITDA: 3.5× (medium) Interest cover: 3.1× Undrawn credit line: $3.5B, to May 2031 Debt due within 12 months: $1.7B Last debt due: 2098 Kinder Morgan funds itself with senior notes, commercial paper and cash flow, and it pays for most growth projects from its own cash flow. At September 30, 2026, debt was $33,171 million: $1,726 million due within 12 months and $31,445 million long-term, mostly senior notes. Cash and cash equivalents were $918 million. The company states net debt of $32,229 million and a ratio of net debt to Adjusted EBITDA of 3.5 times, with Adjusted EBITDA of $9,189 million for the 12 months to September 30, 2026. The $3.5 billion credit facility runs to May 21, 2031, and about $3,490 million was available. No commercial paper was outstanding. In August 2026, Kinder Morgan issued $1.15 billion of 5.55% notes due 2036 and $600 million of 6.15% notes due 2056. The last notes, at 7.45%, are due in March 2098. Interest cover is operating income divided by net interest for the first nine months of 2026 ($3,950 million against $1,285 million). The quarterly dividend is $0.2975 per share, and there were 2,227,715,229 shares of Class P common stock on October 22, 2026. As of 2026-09-30.
Checkpoints: Oct 21, 2026: Q3 2026 results: Adjusted EPS and backlog. Passed. Watch: Adjusted EPS growth of 10% or more and a larger project backlog pass; lower Adjusted EPS fails. Outcome: Adjusted EPS rose 21% to $0.35, and the backlog rose to $14.4 billion. Jan 21, 2027 (estimate): Q4 2026 results and 2027 budget. Pending. Watch: 2026 Adjusted EPS more than 13% above the budget of $1.36 and a higher dividend for 2027 pass; a miss fails. 2027 (estimate): Permits for the Southeast Connector and Permian Link. Pending. Watch: Permit work on schedule for service in 2030 passes; a delay of a year or more fails.
Recent events: 2026-10-21: Kinder Morgan reported Q3 2026 results. Net income attributable to Kinder Morgan rose to $764 million from $628 million, or $0.34 per share, and Adjusted EPS rose 21% to $0.35. Adjusted EBITDA rose 9% to $2.18 billion. The board declared a quarterly dividend of $0.2975 per share, 2% more than a year earlier. The project backlog rose to $14.4 billion, and the ratio of net debt to Adjusted EBITDA was 3.5 times. 2026-10-21: Kinder Morgan took final investment decisions on two large natural gas pipelines. The Southeast Connector of Southern Natural Gas Company has about 470 miles of new pipeline and a capacity of up to 2.6 Bcf per day, at a cost of about $3.1 billion for the Kinder Morgan share. The Permian Link of Natural Gas Pipeline Company of America costs about $4.2 billion, or about $1.6 billion for the Kinder Morgan share, and serves new power plants for a hyperscaler. Both projects are expected to start service in 2030. 2026-08-11: Kinder Morgan, Phillips 66 and HF Sinclair took a final investment decision on the Western Gateway Pipeline, a refined products pipeline of about 1,300 miles to Arizona and California. Kinder Morgan owns 35.1% of the joint venture, and the expected start of service is in 2029. 2026-08-06: Kinder Morgan issued $1.15 billion of 5.55% senior notes due 2036 and $600 million of 6.15% senior notes due 2056. It used the money to repay commercial paper and maturing debt. 2026-07-22: Kinder Morgan reported Q2 2026 results. Net income attributable to Kinder Morgan rose to $867 million, or $0.39 per share, and Adjusted EPS rose 32% to $0.37. Adjusted EBITDA rose 12% to $2,199 million. 2026-05-21: Kinder Morgan extended its $3.5 billion revolving credit facility from August 20, 2026 to May 21, 2031. 2026-01-21: Kinder Morgan reported 2025 results. EPS was $1.37, and Adjusted EPS rose 13% to $1.30. For 2026, it budgeted Adjusted EPS of $1.36, Adjusted EBITDA of $8.6 billion and declared dividends of $1.19 per share.