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Kinder Morgan Earnings: A Weaker End to 2023, but 2024 Looks Much Better

Liquefied natural gas exports remain key to Kinder’s growth; stock remains undervalued.

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 fourth-quarter earnings were weak on a year-over-year basis with modest declines, largely due to lower-than-planned commodity prices and a relatively mild start to winter 2023. EBITDA declined to $1.925 billion from $1.957 billion year over year because of weakness in natural gas operations.

Fortunately, 2024 is off to a better start, with the newly completed STX Midstream deal and a cold snap in January lifting the value of Kinder’s gas storage assets. 2024 EBITDA is targeted at $8.16 billion. We’re a bit more optimistic at about $8.2 billion, representing about 8% growth on a year-over-year basis. The STX assets are contributing about an incremental $200 million-$225 million in EBITDA in 2024, while new projects in service (primarily gas) are contributing a material chunk of the remainder. After updating our model, we’re leaving our $20 fair value estimate and narrow moat rating unchanged.

Key to Kinder’s growth remains liquefied natural gas exports. We see this with the nearly 60% increase in Haynesville gathering volumes in 2023 and an overall 27% increase in gathering volumes. In turn, the increased volumes have led to materially higher utilization across Kinder’s long-haul gas pipelines, increased contract lengths, and more opportunities, particularly for storage to serve as a market-balancing mechanism.

We expect continued opportunities in 2024. Kinder is discussing another long-haul pipeline with customers to move gas out of the Permian to the Gulf Coast to meet liquefied natural gas demand, targeted for 2026 or 2027. This would be on top of the newly in-service expansion to the Permian Highway Pipeline. A possible expansion of the Gulf Coast Express Pipeline also remains an option.

Kinder Morgan Class P Stock Price

Data as of 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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