Kinder Morgan, Inc. KMI is currently undervalued, with a trailing 12-month enterprise value to EBITDA (EV/EBITDA) of 13.88x. This is below the broader industry average of 14.94x and lags key midstream players like Enbridge Inc. ENB and The Williams Companies Inc. WMB, which are trading at 17.01x and 17.56x EV/EBITDA, respectively.
Now, the key question for investors is how to assess KMI, given its undervaluation. To make a well-informed decision, it is crucial to first analyze the fundamental strengths and weaknesses of this leading energy infrastructure company.
Role of Take-or-Pay Agreements in KMI’s Stability
Kinder Morgan operates an extensive network of pipelines spanning 78,000 miles, transporting natural gas, gasoline, crude oil and carbon dioxide. In addition, the company owns 136 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.
Natural Gas Demand Surge Brightens KMI’s Growth Outlook
Being a leading midstream energy company, Kinder Morgan is well-positioned to benefit from the increasing demand for natural gas both in the United States and worldwide. LNG export is rising in the United States, and with KMI being responsible for transporting roughly 40% of all the gas to the liquefaction terminals, the company’s outlook seems bright.
KMI, on its first-quarter 2026 earnings call, expressed expectations that U.S. natural gas demand would surge, driven by rising electricity demand from data centers. Kinder Morgan expects the demand to jump 27% to 150 billion cubic feet per day by 2031 from this year's level.
Time to Bet on KMI Stock?
Investors should also note that the pipeline player’s backlog for growth projects is valued at a massive $10.1 billion as of March 31, 2026. On the call, the company mentioned that the first quarter of 2028 is going to be the average in service date. Thus, KMI stands to benefit from incremental cash flows, as natural gas accounts for roughly 92% of its backlog.
All these positive developments are getting reflected in KMI’s price chart. Over the past six months, the stock gained 15.7%, outperforming the industry’s 14% improvement. Over the same time frame, WMB and ENB surged 18.6% and 13.8%, respectively.
Considering Kinder Morgan remains undervalued and its business model is supported by stable fee-based revenues, similar to WMB and ENB, now could be an ideal time for investors to buy the stock. KMI carries a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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Williams Companies, Inc. (The) (WMB): Free Stock Analysis Report
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This article originally published on Zacks Investment Research (zacks.com).