Kinder Morgan’s Uptrend is Only Half Over: New Highs Are Coming

Key Points

• Mid-stream operators like Kinder Morgan are well-positioned for demand increases in 2025.
• Cash flow is solid, growing, and sufficient to sustain the high-yielding dividend and growth outlook.
• Analysts sentiment is improving, providing a tailwind for this market with a double-digit upside potential. 

Kinder Morgan's NYSE: KMI stock price is up 100% since late 2023 and is heading higher in 2025. The company’s results are underpinned by increasing demand for its core products, amplified by an expanding footprint, and the rally by results and capital returns. The company’s payout ratio may scare investors at first glance, but have no fear; the nearly 100% payout ratio to adjusted earnings isn’t the figure that matters.

Once an MLP, the company continues to pay its investors as if it is one. That means dividends are relative to distributable cash flow sufficient to sustain the high-yielding payment, the distribution growth outlook, and the healthy balance sheet while the company internally funds its growth projects. 

Kinder Morgan has numerous expansion projects, including the recently announced Trident Intrastate Pipeline Project. This project will connect critical LNG infrastructure in Katy, TX, with Port Arthur and is backed by long-term customer contracts that guarantee profitability. Other projects improve handling and distribution capacity, providing business leverage in 2025 and beyond. 

Critical takeaways from the LNG outlook are that prices will remain solid in 2025, supported by increasing demand in industrial, power generation, data centers and consumer sectors. Demand growth, critical to KMI performance, will be most substantial abroad, and U.S. operators like Kinder Morgan are positioned to meet it.

Paraphrasing KMI CEO Kimberly A. Dang, with President Trump in office and demand growth present, the future is bright for Kinder Morgan and other pipeline operators. 

Kinder Morgan Misses Q4 Estimates: So What? 

Kinder Morgan reported a weak quarter relative to the analyst's consensus forecast reported by MarketBeat, but operational improvements offset the miss. The $3.99 billion in revenue is down 1.2% YOY, missing the consensus by 400 basis points as softness in the products pipeline segment offset strength in natural gas.

The critical takeaway is that operational improvement drove EBDA growth in most segments and systemwide, resulting in a solid double-digit bottom-line gain. The $0.32 in adjusted earnings missed consensus by a penny but are up 14% with similarly substantial gains in adjusted EBITDA, net income, and FCF. 

Guidance is a factor in the post-release price action. The company issued solid guidance for 2025, expecting net income attributable to investors to rise by 8% to $2.8 billion. Adjusted EPS and the dividend are also forecasted to grow. The dividend forecast is tepid, with only 2% growth, but the pace is sustainable and allows for reinvestment and debt reduction. 

The company’s net debt-to-adjusted EBITDA ratio is down 40 bps for the quarter to 3.8X and is forecasted to fall at least 20 basis points in 2025. Balance sheet highlights also point to sustained distributions and increases, with increased cash and assets offsetting liability, equity rising incrementally, and total leverage very low—only 1.25X shareholder equity. 

Analysts Trends Support KMI Stock Price and Tailwinds Will Continue to Blow

The analysts’ trends provide a tailwind for the KMI market, with coverage increasing in 2024, the sentiment firming to Moderate Buy from Hold, and the consensus price target rising by 35%. The consensus in early 2025 lags the market, but revisions lead to the high-end range, which assumes a 10% upside from the mid-January price action. These trends are expected to continue in 2025, leading to even higher price points. 

The technical action in KMI stock is robust. The market is up 100% from its lows and looks strong in early 2025. The action at the end of 2024 and early 2025 amounts to a consolidation and continuation signal that could result in a $12 move from the breakout point. That gives a target of $40, which is near record high levels.