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Kinder Morgan Earnings: AI Growth Likely to Add Second Leg to Gas Demand on Top of US LNG Exports

We expect to increase our fair value estimate of Kinder stock.

In this photo illustration a Kinder Morgan logo is seen on a smartphone screen.

Key Morningstar Metrics for Kinder Morgan

What We Thought of Kinder Morgan’s Earnings

Kinder Morgan’s KMI first-quarter earnings and 2024 outlook met our expectations. 2024 EBITDA is expected to be about $8.16 billion, up 8% from 2023 and within striking distance of our $8.20 billion forecast. The growth comes despite weakness in US natural gas prices, helped by healthy results from storage, gathering volumes, and the recently completed STX Midstream deal.

That said, gathering volumes are trending lower than initially expected due to price weakness. Kinder expects to delay about 10% of its planned 2024 gathering and processing spending until the market can support it. After slightly increasing our long-term estimates for growth, we expect to increase our fair value estimate to $22 from $20 per share.

During Kinder’s earnings call, the management team highlighted how the electricity needs of artificial intelligence and data centers could drive demand for gas. AI could be the second leg of gas demand growth after US LNG exports.

Management cited estimates that gas demand will increase from 7 billion cubic feet per day to 16 bcf/d by 2030. This growth would imply AI will be around 15%-20% of electricity demand by that time, up from 2.5% in 2022. Gas would serve about 40% of the incremental demand, due to challenges with intermittency in solar and wind power. Kinder would remain well-positioned since it serves about 20% of the US power market and transports about 40% of US gas.

Kinder Morgan Stock vs. Morningstar Fair Value Estimate

Source: Morningstar Direct.

The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar’s editorial policies.

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About the Author

Stephen Ellis

Strategist
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Stephen Ellis is an energy and utilities strategist for Morningstar Research Services LLC, a wholly owned subsidiary of Morningstar, Inc., covering midstream companies. Ellis is a former member of Morningstar’s China Economic Committee, which provides research on the long-term outlook for the Chinese economy.

Before assuming his current role in 2017, he was director of equity research for financial services and a senior equity analyst. He is also a former editor of the Morningstar Opportunistic Investor newsletter and a former member of the Economic Moat Committee, a group of senior members of the equity research team responsible for reviewing all Economic MoatTM and Moat TrendTM ratings issued by Morningstar.

Prior to joining Morningstar in 2007, he worked as a freelance analyst for The Motley Fool and spent three years working in project and financial analysis for Environmental Systems Research Institute (ESRI), a supplier of geographic information system software and geodatabase management applications.

He holds a bachelor’s degree in business administration and a master’s degree in business administration from the University of Redlands.

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