Kinder Morgan Trades at a Bargain: Is it a Good Time to Buy the Stock?

Kinder Morgan KMI is currently undervalued, with a trailing 12-month enterprise value to EBITDA (EV/EBITDA) of 13.65x. This is below the broader industry average of 14.70x and lags key midstream players like Enbridge Inc. ENB and The Williams Companies Inc. WMB, trading at 17.35x and 17.74x EV/EBITDA, respectively. This lower valuation may indicate market skepticism about KMI’s prospects or potential mispricing of the midstream company’s intrinsic value. Image Source: Zacks Investment ResearchThe key question for investors is how to assess KMI, given its valuation. To make a well-informed decision, it is crucial to first analyze the fundamental strengths and weaknesses of this leading energy infrastructure company.The Role of Take-or-Pay Agreements in KMI’s StabilityKinder Morgan operates an extensive network of pipelines spanning 79,000 miles, transporting natural gas, gasoline, crude oil and carbon dioxide. In addition, the company owns 139 terminals that store a variety of products, including renewable fuels, petroleum products, chemicals and vegetable oils.As a leading midstream service provider, Kinder Morgan’s pipeline and storage assets are secured under long-term take-or-pay contracts. These contracts ensure that shippers pay for the capacity reserved, whether they utilize it or not, which provides a steady stream of revenues. This structure allows Kinder Morgan to generate stable earnings, primarily insulated from fluctuations in the volume of natural gas transported, offering significant stability to its bottom line.KMI’s Future Outlook Bolstered by Increasing Gas ConsumptionThe demand for natural gas in the United States is anticipated to grow rapidly, backed by several important factors. As the nation shifts toward cleaner energy, natural gas is being increasingly utilized as a transitional fuel, given its cleaner-burning properties compared to coal and oil, which result in lower carbon emissions. Moreover, the rise in industrial activity and the growing demand for electricity, particularly from gas-powered plants, are fueling this increased demand. Additionally, the expansion of natural gas exports, mainly as liquefied natural gas, to satisfy global energy needs further boosts domestic demand.As a leading transporter of natural gas, Kinder Morgan is well-positioned to benefit from the growing demand for natural gas, which aids its earnings.Robust Project Backlog: KMI Secures Predictable Cash FlowsKMI boasts a robust $8.1 billion project backlog, reflecting strong growth prospects. The company has committed $2.5 billion annually to expansion, ensuring steady capital investment in infrastructure improvements. These projects focus on enhancing natural gas transportation and storage, particularly in high-demand regions like the Gulf Coast and Southeast U.S. With long-term contracts backing these initiatives, KMI secures predictable cash flows and a stable return on investment. Image Source: Kinder MorganKey projects like Trident, Mississippi Crossing and Mid-South Express Project (MSX) are strategically positioned to meet rising natural gas demand from LNG exports, industrial users and power plants. Trident supports LNG growth in Southeast Texas, while Mississippi Crossing enhances pipeline connectivity. MSX, a large-scale expansion, strengthens KMI’s Tennessee Gas Pipeline network. These developments not only boost earnings potential but also reinforce KMI’s position as a leading U.S. midstream operator.Should Investors Bet on KMI Stock?Over the past year, KMI has climbed 66.9%, outperforming the industry’s composite stocks, which gained 47.2%.One-Year Price Chart Image Source: Zacks Investment ResearchHowever, investors should be cautious about rushing to buy the stock at this moment, as several uncertainties surround the midstream company. KMI’s large-scale infrastructure projects, including the MSX expansion, encounter extended regulatory timelines due to Federal Energy Regulatory Commission (“FERC”) permitting and state-level approvals. These delays can slow project execution and affect the company's ability to meet growing natural gas demand. In regions like the Northeast, additional state-level hurdles make expansion projects even more challenging, limiting opportunities for new infrastructure development.Beyond regulatory challenges, competition in the natural gas midstream sector is intensifying. KMI must compete with other operators to secure LNG and industrial contracts as demand for AI-driven data centers and power generation grows. However, with multiple players vying for these opportunities, KMI’s market share could be constrained, requiring strategic positioning to maintain its competitive edge.Therefore, although the stock is undervalued, investors should wait for the uncertainties to resolve. It carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.Zacks' Research Chief Names "Stock Most Likely to Double"Our team of experts has just released the 5 stocks with the greatest probability of gaining +100% or more in the coming months. Of those 5, Director of Research Sheraz Mian highlights the one stock set to climb highest.This top pick is among the most innovative financial firms. With a fast-growing customer base (already 50+ million) and a diverse set of cutting edge solutions, this stock is poised for big gains. Of course, all our elite picks aren’t winners but this one could far surpass earlier Zacks’ Stocks Set to Double like Nano-X Imaging which shot up +129.6% in little more than 9 months.Free: See Our Top Stock And 4 Runners UpWant the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Williams Companies, Inc. (The) (WMB): Free Stock Analysis Report Enbridge Inc (ENB): Free Stock Analysis Report Kinder Morgan, Inc. (KMI): Free Stock Analysis ReportTo read this article on Zacks.com click here.Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks