ET vs. KMI: Which Midstream Stock Has More Upside Potential for Now?

Core Insights - The Zacks Oil and Gas Production and Pipeline industry is crucial for meeting global energy demands, driven by economic growth and rising demand in emerging markets [1] - Innovations in drilling and recovery methods are enhancing production efficiency and increasing the need for midstream services [1] Industry Overview - Pipeline networks are essential for the efficient transportation of crude oil, natural gas, and refined products, providing stable cash flows through long-term agreements [2] - The demand for midstream infrastructure is expected to grow due to increased shale output in North America and the expanding role of natural gas in electricity production [2] Company Comparisons - Energy Transfer (ET) and Kinder Morgan (KMI) are two leading midstream energy companies in North America, operating extensive pipeline and storage networks [3] - ET has a diversified midstream network and is well-positioned to benefit from rising U.S. energy output and global demand, supported by steady cash flows and capital management [4] - KMI offers a stable investment backed by its natural gas-focused midstream system, ensuring consistent cash flows through long-term agreements [5] Earnings Growth Projections - ET's earnings per unit are projected to grow by 7.03% in 2025 and 15.82% in 2026, with a long-term growth rate of 12.45% [7] - KMI's earnings per share are expected to grow by 10.43% in 2025 and 5.12% in 2026, with a long-term growth rate of 8.95% [10] Financial Metrics - ET has a return on equity (ROE) of 10.71%, outperforming KMI's 8.57% [12] - ET's debt-to-capital ratio is 58.19%, compared to KMI's 50.42%, indicating both companies are utilizing higher debt levels [16] - ET's dividend yield is 8.07%, significantly higher than KMI's 4.36% [17] Valuation - ET is trading at a forward P/E of 10.57X, while KMI is at 20.14X, making ET appear more attractive on a valuation basis [18] Conclusion - ET is positioned as a more compelling investment option compared to KMI, with stronger earnings projections, higher dividend payouts, and a more attractive valuation [20]