Kinder Morgan's 'Core Business Is Robust Now,' BofA Upgrades Stock

Zinger Key Points

BofA upgraded Kinder Morgan to Buy, raising the price target from $23 to $27, citing a stabilized base business.
Kinder Morgan's Q3 earnings are due on October 16, with analysts predicting adjusted EPS of $0.27 and revenues of $3.95 billion.
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BofA Securities has upgraded Kinder Morgan KMI, an energy infrastructure company that owns and controls oil and gas pipelines and terminals. The analyst notes stabilized base business.

The company is scheduled to report third-quarter 2024 earnings on 16 October, with analysts estimating $0.27 for adjusted EPS and $3.95 billion for revenues.

Amid uncertainty in the energy sector, the analyst recognizes the potential in companies with contracted natural gas pipelines.

With increasing demand driven by Gulf Coast LNG projects and the electrification of utilities through AI, Kinder Morgan is positioned for long-term growth through its contracted business model.

The strength of its natural gas pipeline business, which commands a higher valuation, balances out the declines seen in lower-valued CO and product pipelines.

The analyst has upgraded from Neutral to Buy rating with a price target of $27, up from $23.

Kinder Morgan has demonstrated its ability to supply gas to utilities, similar to Williams Companies Inc WMB, exemplified by the recent sanctioning of a $3 billion, 1.2 Bcf/d SNG pipeline expansion last quarter.

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BofA writes that the core business is now robust. Concerns that previously caused hesitation have been resolved, including the Supreme Court halted the Good Neighbor plan, which could have cost Kinder Morgan billions, the Double H pipeline, which represents the only significant contract roll of approximately $30 million in 2024, is transitioning to NGL service, effectively compensating for the prior contract, and recent acreage exchanges are revitalizing oil declines.

Kinder Morgan currently accounts for 45% of LNG deliveries, and the analyst anticipates it will retain this market share.

More importantly, the rise in power demand driven by electrification and AI is expected to contribute an additional conservative estimate of 4-5 Bcf/d of gas demand by 2030, particularly in regions served by Kinder Morgan pipelines.

Price Action: KMI stock is up 3.56% at $24.56 at last check Friday.

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