Core Viewpoint - Kinder Morgan, Inc. (KMI) is expected to report second-quarter 2025 earnings on July 16, with factors influencing its performance being analyzed [1] Group 1: Q1 Performance and Surprise History - In the last reported quarter, KMI's adjusted earnings per share were 34 cents, missing the Zacks Consensus Estimate of 35 cents due to a planned turnaround at its condensate processing facility and increased operating costs [2] - KMI has missed the Zacks Consensus Estimate in three of the last four quarters, with an average negative surprise of 3.33% [2] Group 2: Estimate Trends - The Zacks Consensus Estimate for second-quarter earnings per share is 28 cents, reflecting a 12% improvement from the prior year [3] - The top-line estimate of $3.88 billion indicates an 8.69% increase from the year-ago figure [3] Group 3: Factors Influencing Performance - KMI is expected to maintain stable performance due to long-term contracts that ensure consistent cash flows and protect against short-term market fluctuations [4] - The Natural Gas Henry Hub Spot price increased almost 53% year over year in the second quarter, which may have positively impacted KMI's revenues [4] - Higher gathering and transport volumes year over year likely aided overall throughput and fee-based earnings [5] - KMI's project backlog, approximately $8 billion, is expected to expand, supported by acquisition contributions from the Outrigger Energy II deal [5] - Proactive tariff mitigation and disciplined cost controls may have helped preserve margins amid inflationary pressures [5] Group 4: Earnings Whisper - KMI's Earnings ESP is +20.71%, indicating a strong potential for an earnings beat [7] - The company currently holds a Zacks Rank of 3, suggesting a stable outlook [7] - The upcoming Q2 earnings report is anticipated to show EPS of $0.28, up 12% year over year, supported by higher gas prices and increased transport volumes [8]

Core Insights - Kinder Morgan (KMI) is recognized as one of the largest and most renowned companies in the energy sector, headquartered in Houston, Texas [1] Investment Strategy - The focus is on long-term growth and dividend growth investing, with an emphasis on identifying undervalued stocks and high-quality dividend-growing companies [1] - Profitability is prioritized as a safer driver of gains compared to low valuation, highlighting the importance of margins, free cash flow stability and growth, and returns on invested capital [1] - Continuous research is conducted on high-quality companies to uncover potential investment opportunities [1]

Core Viewpoint - Midstream operators are positioned to benefit from increasing demand for natural gas driven by artificial intelligence, data centers, and LNG exports, while providing reliable cash flow and high distribution yields. Group 1: Energy Transfer - Energy Transfer offers a yield of 7.4%, supported by strong distributable cash flow, with approximately 90% of EBITDA derived from fee-based contracts, many of which are take-or-pay [2][4] - The company is increasing its capital expenditures from $3 billion in 2024 to $5 billion this year to capitalize on growing power demand and LNG exports [3] - Energy Transfer has signed a supply agreement with Cloudburst for a data center project in Texas and is seeing progress on the Lake Charles LNG project, enhancing its growth prospects [4] Group 2: Enterprise Products Partners - Enterprise Products Partners has a yield of 6.8% and has increased its payout for 26 consecutive years, with about 85% of cash flow coming from fee-based contracts [5][6] - The company is pursuing $7.6 billion in growth projects, with $6 billion expected to go live this year, and has increased its spending on these projects from $3.9 billion last year to $4.5 billion this year [6] Group 3: Western Midstream - Western Midstream offers a yield of 9.4% and maintains a strong balance sheet with a leverage ratio below 3, supported by cost-of-service contracts and minimum volume commitments [7][8] - The company aims for mid-single-digit annual distribution increases while investing in expansion opportunities, notably the Pathfinder produced-water system, which is projected to cost over $450 million [8] Group 4: MPLX - MPLX has a yield of 7.5% and has achieved double-digit distribution growth for three consecutive years, with its distribution covered 1.5 times by cash flow [9][10] - The company is increasing its expansion capex to $1.7 billion in 2025, driven by demand for natural gas and NGLs, and is enhancing its infrastructure through full ownership of the BANGL pipeline and a joint venture with Oneok [10][11] Group 5: Kinder Morgan - Kinder Morgan has the lowest yield at 4.1% but controls about 40% of U.S. natural gas flow, with 80% of cash flow from volumetric fee-based contracts [13][15] - The company's project backlog has surged to $8.8 billion, primarily focused on power demand related to AI and LNG facilities, with expected EBITDA yields of 16.7% on new spending [14][15] - Kinder Morgan has improved its balance sheet, reducing leverage from 5.1 in 2017 to 4 in 2024, positioning itself well for future growth amid rising natural gas export demand [15]

Core Viewpoint - The article discusses the reliability of brokerage recommendations, particularly focusing on Kinder Morgan (KMI), and highlights the potential misalignment of interests between brokerage firms and retail investors [1][10]. Brokerage Recommendation Summary - Kinder Morgan has an average brokerage recommendation (ABR) of 2.00, indicating a "Buy" based on recommendations from 19 brokerage firms, with 9 "Strong Buy" and 1 "Buy" [2][5]. - Strong Buy and Buy recommendations account for 47.4% and 5.3% of all recommendations, respectively [2]. Analysis of Brokerage Recommendations - Studies indicate that brokerage recommendations may not effectively guide investors in selecting stocks with the best price increase potential [5]. - Analysts from brokerage firms tend to exhibit a strong positive bias in their ratings, issuing five "Strong Buy" recommendations for every "Strong Sell" [6][10]. - The interests of brokerage firms may not align with those of retail investors, leading to a lack of insight into future stock price movements [7]. Zacks Rank Comparison - Zacks Rank is a proprietary stock rating tool that categorizes stocks from 1 (Strong Buy) to 5 (Strong Sell) and is based on earnings estimate revisions, showing a strong correlation with near-term stock price movements [8][11]. - Unlike ABR, Zacks Rank is a quantitative model and is updated more frequently, reflecting timely changes in earnings estimates [9][12]. Current Earnings Estimates for Kinder Morgan - The Zacks Consensus Estimate for Kinder Morgan's current year earnings remains unchanged at $1.26, suggesting steady analyst views on the company's earnings prospects [13]. - The Zacks Rank for Kinder Morgan is 3 (Hold), indicating a cautious approach despite the Buy-equivalent ABR [14].

KMI's Strategy and Outlook - Hydrocarbon fuels are essential and resilient, with global energy needs expected to expand 30% between 2016 and 2040[15] - Kinder Morgan transports approximately 40% of all natural gas consumed in the U S[46, 49] - KMI aims to increase dividends declared by 60% to $0 80 per share in 2018, maintaining a best-in-class coverage of 2 6x[59] - KMI plans to place $3 2 billion of growth projects into commercial service during 2018, with an investment multiple of approximately 7 0x[59] Financial Performance and Projections - KMI's 2018 budgeted EBITDA is $7 5 billion, a 4% increase from the previous year[59] - KMI's 5-year growth project backlog is expected to generate approximately $1 6 billion of cumulative EBITDA[61] - KMI's 2018 budgeted Distributable Cash Flow (DCF) is $4 567 billion, or $2 05 per share, a 2% and 3% increase respectively[238, 276] - KMI's 2018 budgeted growth capital is $2 215 billion, a 26% decrease from the previous year[238, 276] - KMI's 2018 budgeted discretionary free cash flow is $568 million[238] KML and TMEP - KML's 2018 budgeted Adjusted EBITDA is C$474 million, a 22% increase from the previous year[210, 323] - The Trans Mountain Expansion Project (TMEP) is estimated to cost C$7 4 billion and could grow Adjusted EBITDA by C$1 1 billion[222, 216]

Energy Market Outlook - Global energy demand is projected to steadily grow, driven by developing economies like India (32% of incremental demand from 2017 to 2040), China (26%), and Africa (15%) [9, 12] - The U S is the largest oil and gas producer, with production up 23% and 29% respectively in 2017 compared to 2000 and 2010 [16, 17] - U S oil and natural gas production is expected to grow by approximately 33% from 2017 to 2025 [22] Kinder Morgan's Asset and Financial Highlights - Kinder Morgan transports approximately 40% of the natural gas consumed in the U S [26, 39] - The company's 2019 budgeted Segment EBDA is approximately $84 billion, with natural gas pipelines contributing 61%, products pipelines 15%, terminals 14%, CO2 oil production 6%, and CO2 S&T 4% [25] - Kinder Morgan anticipates $5 billion of distributable cash flow (DCF) in 2019, allocating approximately $2 billion for dividends and $3 billion to enhance shareholder value [30] - Approximately 96% of Kinder Morgan's 2019 budgeted segment cash flow is from take-or-pay and other fee-based contracts or hedged [33] Growth and Capital Allocation - Kinder Morgan has $61 billion of commercially secured capital projects underway, with $43 billion specifically for natural gas projects [44] - The company's capital allocation priorities include maintaining a strong balance sheet with a target Net Debt / Adjusted EBITDA of approximately 45x, dividend growth, and share repurchases [37, 38] - U S natural gas production is projected to grow by over 30 Bcfd, or approximately 37%, through 2030, driven by key basins [39] Financial Performance and Valuation - Kinder Morgan's 2019 budgeted Adjusted EBITDA is $78 billion, and distributable cash flow (DCF) is $50 billion [73] - The company's 2019 dividend is targeted at $100 per share, with a planned increase to $125 per share in 2020 [38] - Approximately 69% of Kinder Morgan's 2019 budgeted net revenue is generated by end-users [87]

Energy Market Overview - Global energy demand is expected to grow steadily, driven by population growth, urbanization, and economic development, with developing economies like India (32%), China (26%), Africa (15%), and Southeast Asia (15%) leading the increase from 2017 to 2040[9] - The U S is the largest oil and gas producer globally, with production expected to grow by approximately 33% by 2025, positioning it as a key trade partner[11, 15] - By 2025, the U S is projected to supply over 50% of the expected global supply increase and produce nearly 1 out of every 5 barrels of oil and 1 out of every 4 cubic meters of natural gas worldwide[15] Kinder Morgan's Business and Financial Highlights - Kinder Morgan is a leader in energy infrastructure, operating approximately 70,000 miles of natural gas pipelines and transporting about 40% of the natural gas consumed in the U S [20, 49] - The company anticipates approximately $5 billion in distributable cash flow (DCF) for 2019, allocating around $2 billion for dividends and $3 billion for enhancing shareholder value[21] - Kinder Morgan has a market capitalization exceeding $40 billion and boasts investment-grade rated debt, with recent upgrades to BBB / Baa2 by S&P and Moody's[24] - The company offers a current dividend yield of 5% based on a $20 share price, with a planned 25% dividend growth in both 2019 ($1 00/share) and 2020 ($1 25/share)[24, 30] - Kinder Morgan has repurchased approximately $525 million of its shares since December 2017 as part of a $2 billion share buyback program[24] Growth and Capital Projects - The company has $6 1 billion of commercially secured capital projects underway, primarily focused on natural gas opportunities[36] - U S natural gas production is projected to grow by over 30 Bcfd, nearly 40%, by 2030, with over 70% of the forecasted demand growth concentrated in Texas and Louisiana[33, 34] - Kinder Morgan is investing in Permian takeaway projects, including GCX and PHP, with a combined capacity of 4 1 Bcfd, and is in discussions for a potential third pipeline[40, 42] - The company's network is contracted for over 5 7 Bcfd of transport capacity to U S liquefaction facilities under 19-year average term contracts, with approximately $1 billion invested in transportation infrastructure to support LNG exports[49] Financial Performance and Stability - Approximately 90% of Kinder Morgan's earnings are underpinned by take-or-pay or fee-based contracts, ensuring stable cash flows[65] - The company projects approximately $8 billion in adjusted EBITDA for 2019[66] - Kinder Morgan has a long-term target net debt / adjusted EBITDA ratio of approximately 4 5x, which was reached as of March 31, 2019[30]

Financial Performance and Guidance - The company's 2021 budgeted Adjusted EBITDA is $6.8 billion, a decrease of approximately 2% compared to the 2020 forecast, reflecting headwinds from lower re-contracting rates and crude volumes[15] - 2021 Distributable Cash Flow (DCF) is budgeted at $4.4 billion, down approximately 3% from the 2020 forecast, also impacted by higher anticipated sustaining capex[15] - Net income for 2021 is projected to be greater than $2.1 billion, an increase primarily due to asset and goodwill impairments taken during 2020[15] - The company has a $2 billion share buyback program, with $575 million already purchased since December 2017[13] - The company maintains a current dividend yield of over 7%, with a Q3 2020 annualized dividend of $1.05 per share[14] Business Overview and Strategy - The company moves approximately 40% of U S natural gas consumption and exports[9] - Approximately 74% of the company's earnings are from take-or-pay or hedged contracts, providing stable cash flows[37, 48] - The company has commercially-secured capital projects underway totaling $2.6 billion as of September 30, 2020[23] - The company's business mix includes 62% natural gas, 15% products, 14% terminals, 6% CO2, and 3% oil & gas production[11] Market and Industry Trends - U S natural gas demand is expected to grow, with over 85% of the forecasted demand growth driven by Texas and Louisiana[18] - Global biofuels demand is expected to increase by approximately 146% from 2019 to 2040[46]

Acquisitions and Divestitures - Kinder Morgan acquired Northeast Transport & Storage Assets for $1225 million[8], with ~41 bcf of FERC-certificated storage capacity and ~3 bcfd of aggregate transportation pipeline capacity[11] - The company acquired Kinetrex Energy for $310 million[12], which includes 1 operational landfill-RNG facility with ~04 bcf capacity and expects 3 landfill-RNG facilities operational by 2022 end with total capacity of 35 bcf[17] Financial Performance and Projections - The company's 2021 forecast EBITDA is $79 billion[23] - The company has a $2 billion share buyback program with over $14 billion of program capacity remaining[23] - The company's 2021 expected Net Debt / Adjusted EBITDA is 40x[25] Market Position and Strategy - The company moves ~40% of US natural gas consumption & exports[19] - The company's stable cash flows are with ~72% take-or-pay or hedged earnings[26],[79] - The company has a $13 billion project backlog with ~64% allocated to natural gas projects[25],[83] Energy Transition and Renewables - The company's CO2 transport capacity is ~15 bcfd with ~1500 miles of CO2 pipelines[18] - The company handled nearly 260 mbbld of ethanol, biodiesel, & renewable diesel in 2020[69]

Industry Overview - The Zacks Oil and Gas Production and Pipeline industry is essential for meeting global energy demand, driven by economic growth and rising consumption in emerging markets [1] - Despite the shift toward renewables, hydrocarbons remain crucial for transportation, heating, and petrochemical production [1] - Technological advancements like horizontal drilling and enhanced recovery techniques are unlocking new reserves and boosting productivity [1] Pipeline Infrastructure - Pipeline infrastructure is critical for transporting crude oil, natural gas, and refined products efficiently [2] - Stable, fee-based revenue models and long-term contracts provide predictable cash flows for pipeline operators, insulating them from commodity price volatility [2] - The expansion of North American shale production and rising export capacity is expected to increase demand for midstream infrastructure [2] Company Comparisons - Energy Transfer (ET) and Kinder Morgan (KMI) are two of the largest midstream energy companies in North America, operating extensive networks of pipelines and storage facilities [3] - ET offers a diversified midstream infrastructure with stable cash flows and strategic export terminal access, positioning it well for rising U.S. energy production and global demand [4] - KMI has a primarily natural gas-focused midstream network with long-term contracts that provide predictable cash flows, appealing to income-focused investors [5] Earnings Growth Projections - The Zacks Consensus Estimate for ET's earnings per share (EPS) in 2025 and 2026 has increased by 2.86% and 4.26%, respectively [7] - KMI's 2025 EPS estimate has declined by 0.8%, while its 2026 EPS moved up by 2.26% [9] Dividend Yield - ET offers a dividend yield of 7.2%, significantly higher than KMI's 4.04% and the S&P 500's average of 1.58% [8][12] Valuation Metrics - ET is trading at a forward P/E of 12.54X, which is cheaper than KMI's 22.08X and the S&P 500's 22.43X [8][15] - ET's current return on equity (ROE) is 11.47%, while KMI's ROE is 16.6%, both underperforming the S&P 500's ROE of 17.02% [10] Debt to Capital - ET's debt-to-capital ratio is 56.6%, compared to KMI's 48.42%, both higher than the S&P 500's 38.07% [14] Price Performance - ET's units have gained 4.2% in the past month, outperforming KMI's 1.2% gain and the S&P 500's return of 4.4% [16] Conclusion - Energy Transfer is currently favored over Kinder Morgan due to rising earnings estimates, higher dividend yield, better return on equity, and cheaper valuation [20][21]