Why Kinder Morgan’s recent quarter is back in focus

Kinder Morgan (KMI) is back on many watchlists after a first quarter that topped analyst earnings expectations, combined with a dividend increase and reinforced by volatile global energy markets linked to the Iran conflict.

Despite a recent 1 day share price return of around a 1% decline, Kinder Morgan’s 90 day share price return of 9.86% and 1 year total shareholder return of 25.11% suggest momentum has been building as investors respond to the earnings beat, dividend increase and new Western Gateway project, while closely watching the pipeline explosion lawsuit and upcoming COO transition.

If Kinder Morgan’s recent move has you looking across energy infrastructure, this is a useful moment to scan for other power grid focused operators using our 35 power grid technology and infrastructure stocks

With Kinder Morgan trading around $32.53, roughly 8.6% below average analyst targets and at an estimated 38% discount to intrinsic value, the key question is whether this represents a real opportunity or whether the market is already pricing in future growth.

Most Popular Narrative: 7.7% Undervalued

With Kinder Morgan last closing at $32.53 against a narrative fair value of $35.24, the current setup hinges on long dated gas and LNG demand assumptions.

The surging U.S. LNG export market, with U.S. gas feed to export terminals projected to double by 2030 and Kinder Morgan already transporting about 40% of this feed gas, is likely to significantly increase future earnings, especially as additional U.S. capacity comes online and new contracts are signed.

Want to see what kind of revenue path sits behind that call, and how profit margins and future P/E expectations combine to support this higher fair value?

Result: Fair Value of $35.24 (UNDERVALUED)

However, this hinges on Kinder Morgan managing US$32.3b of net debt and avoiding weaker pipeline utilization if energy transition policies reduce long term gas volumes.

Next Steps

With both risks and rewards on the table, are you comfortable with how the story balances out, or do you want to stress test it yourself? Take a closer look at the 3 key rewards and 2 important warning signs

Looking for more investment ideas?

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.