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Kinder Morgan (KMI) has recently unveiled strong fourth-quarter results and guidance for 2025. Notably, the company’s project backlog has significantly increased, driven by rising demand for natural gas linked to liquefied natural gas (LNG) exports, power generation, and the burgeoning needs created by artificial intelligence (AI).
Here, we will examine Kinder Morgan’s latest performance and forecasts to assess whether now is an opportune moment to invest in the stock.
Impressive Q4 Results and Expanding Project Backlog
A key takeaway from Kinder Morgan’s recent earnings announcement is the impressive growth of its project backlog, which surged by 60% from the third quarter, climbing from $5.1 billion to $8.1 billion. Natural gas projects make up a substantial 89% of this backlog.
The company anticipates an EBITDA multiple of 5.8 for most of its projects not related to carbon dioxide enhanced oil recovery. This indicates that for every $100 million invested, an additional $17.24 million in EBITDA is expected to be generated. Typically, midstream projects operate within the 6x to 8x EBITDA multiple range, which suggests a robust potential return on these investments.
Kinder Morgan has emphasized three significant natural gas projects it has secured: South System Expansion 4, Mississippi Crossing, and the Trident Intrastate Pipeline. The company asserts that it is well-positioned to capitalize on trends fueling natural gas demand, supplying 45% of LNG export needs, 50% of natural gas exports to Mexico, and 45% of power demand in key regions including the desert Southwest, Texas, and the Southeast. Additionally, the firm has noted that the demand for power to support AI data centers is only beginning to emerge.
Looking ahead, Kinder Morgan expects U.S. natural gas demand to rise by 28 billion cubic feet (BCF) daily by 2030. This forecast aligns closely with a similar projection from natural gas producer Antero Resources regarding the anticipated increase. While gradual growth in U.S. natural gas consumption has been observed, these figures suggest nearly a doubling in demand over a five-year span, representing a significant shift.
From a financial perspective, Kinder Morgan’s adjusted earnings per share (EPS) climbed by 14% to $0.32, slightly falling short of the analyst consensus that predicted $0.34. The company’s adjusted EBITDA also rose, increasing by 7% to reach $2.06 billion, while its distributable cash flow (DCF) grew by 8%, totaling $1.26 billion, with the DCF per share up by 10% to $0.57. Both adjusted EBITDA and DCF are pivotal metrics for evaluating companies in the midstream sector.
The firm declared a quarterly dividend of $0.2875 per share, marking a 2% rise compared to last year, resulting in a forward yield of about 3.8%. Moreover, it recorded free cash flow of $449 million after dividend payments for the year, indicating sound coverage for its dividend obligations.
At year-end, Kinder Morgan’s leverage ratio (calculated as net debt divided by trailing-12-month adjusted EBITDA) stood at 4 times, which is within the typical range for midstream firms (3 to 4.5 times) and aligns with Kinder Morgan’s own leverage target.
In terms of future projections, Kinder Morgan anticipates a 4% growth in adjusted EBITDA, expecting it to reach $8.3 billion, alongside a 10% increase in adjusted EPS, aiming for $1.27. The company plans to reduce its leverage to 3.8 times by the end of the year while also increasing its dividend by 2% to $1.17 for the year. Notably, this guidance does not account for the recent announcement of a $640 million acquisition of Outrigger Energy II, intended to enhance its operations in the Bakken oil formation. The acquisition is projected at a multiple of 8 times the expected EBITDA for 2025, potentially yielding around $80 billion if held for the full year.
Additionally, Kinder Morgan plans to escalate its growth capital expenditure (capex) from a prior budget of $2 billion to $2.5 billion annually over the coming years.
Is Kinder Morgan Stock a Good Investment?
Overall, Kinder Morgan’s recent fourth-quarter results and forecasts appear promising, particularly due to its substantial project backlog and anticipated return on investments. The natural gas sector is poised for remarkable demand growth in the coming years, and Kinder Morgan is strategically positioned to leverage this opportunity. Besides the expected surge in U.S. demand driven by AI data centers, considerable interest exists in exporting natural gas to Mexico and overseas markets.
Kinder Morgan maintains strong connections within the Texas utility market and operates pipelines near Abilene, Texas—the proposed site for the significant $500 billion Stargate AI data center project. This positions the company favorably as Texas emerges as a hub for AI infrastructure development, benefitting from access to inexpensive associated gas from the Permian Basin. Despite recent market fluctuations prompted by the introduction of DeepSeek, a new low-cost AI training model from China, uncertainties regarding the implication of such developments do not seem likely to impede U.S. AI initiatives substantially.
In terms of valuation, Kinder Morgan trades at an enterprise value-to-EBITDA ratio exceeding 11 times. This figure is competitive compared to historical valuations of midstream companies and underscores the attractive growth potential ahead. Thus, Kinder Morgan presents a compelling investment opportunity at its current price level.
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