The Zacks Oil & Gas – Production & Pipelines industry remains essential to the nation’s energy security and overall economic stability. The United States depends on a broad and efficient pipeline system to transport hydrocarbons from key producing regions such as the Permian, Bakken and Marcellus basins to refineries, export hubs and end consumers.
The sector’s long-term prospects continue to appear favorable, supported by consistent domestic energy demand, growing liquefied natural gas exports and the ongoing transition from coal to natural gas by utilities. Energy Transfer ET and Kinder Morgan KMI rank among the major midstream operators, offering investors exposure to energy transportation and storage businesses along with attractive income-generating potential.
The industry is also expected to benefit from supportive regulatory measures, infrastructure upgrade initiatives and technological advancements designed to improve operational efficiency and reduce emissions. In a period marked by global energy uncertainty, U.S. pipeline infrastructure has become increasingly strategic, especially in helping supply energy to allied nations. Midstream companies generally benefit from stable, fee-based revenue models backed by long-term contracts, which help reduce exposure to commodity price fluctuations.
Energy Transfer owns a diversified portfolio that includes crude oil, NGL, refined products and natural gas pipelines, as well as storage and processing facilities. The company also has a meaningful presence in the Permian Basin. Energy Transfer’s stake in the Dakota Access Pipeline and ownership interests in export terminals further strengthen its operating footprint and cash flow generation capabilities.
Kinder Morgan provides a relatively stable investment proposition supported by its expansive midstream network, which is heavily concentrated in natural gas transportation. Backed by long-term, fee-based contracts, the company generates dependable cash flows. Kinder Morgan’s disciplined approach to capital allocation, solid dividend profile and investments in renewable natural gas projects improve its resilience and support steady long-term growth. Consequently, KMI continues to attract income-focused investors looking for reliable returns with lower sensitivity to commodity price volatility within North America’s essential energy infrastructure market.
As U.S. hydrocarbon production continues to grow, demand for midstream infrastructure and services remains robust. Given this backdrop, let us examine the fundamentals of these two companies to determine which stock currently presents the more compelling investment opportunity.
KMI & ET’s Earnings Growth Projections
The Zacks Consensus Estimate for KMI’s 2026 and 2027 earnings per share have moved up 7.19% and 2.03%, respectively, in the past 60 days.
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The same for ET’s 2026 and 2027 earnings per share have gone down 7.43% and 8.18%, respectively, in the past 60 days.
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Return on Equity
Return on Equity (“ROE”) is an essential financial indicator that evaluates a company’s efficiency in generating profits from the equity invested by its shareholders. It demonstrates how well management is utilizing the capital provided to increase earnings and deliver value.
KMI’s current ROE is 9.9% compared with ET’s 9.77%.
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Debt to Capital
The Zacks Oil-Energy sector is a capital-intensive one and huge investments are required at regular intervals to upgrade, maintain and expand operations. The usage of new evolving technology also requires investments. Therefore, the companies operating in the sector borrow from the market and add it to their internal cash generation to fund the long-term investments.
ET’s debt-to-capital currently stands at 58.23% compared with KMI’s 49.59%.
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Valuation
Energy Transfer currently appears to be trading at a discount compared with Kinder Morgan on a forward 12-month Price/Earnings basis.
ET is currently trading at 13.74X, while KMI is trading at 21.47X, both trading at a discount compared with the S&P 500’s 22.18X.
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Times Interest Earned Ratio
The Times Interest Earned (“TIE”) ratio is a key solvency metric that evaluates a company’s capacity to meet the long-term financial obligations, particularly its ability to cover interest expenses on outstanding debt.
KMI’s current TIE ratio is 3.4, a tad higher than ET’s 2.98. A healthy ratio indicates that both firms can comfortably meet their debt payment obligations.
Price Performance
ET’s units have gained 14.8% in the past six months compared with KMI’s rally of 18% and the industry's return of 25.6%.
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Rounding Up
Energy Transfer and Kinder Morgan are utilizing their well-spread-out pipelines and related infrastructure to successfully transfer hydrocarbons from the production region to their end users.
KMI’s better earnings growth projection, lower usage of debt to run operations, a tad better TIE ratio, stronger price performance and better return make it attractive.
Given the above discussion, KMI, which sports a Zacks Rank #1 (Strong Buy), has a clean edge on ET, which carries a Zacks Rank #3 (Hold).
You can see the complete list of today’s Zacks #1 Rank stocks here.
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Kinder Morgan, Inc. (KMI): Free Stock Analysis Report
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This article originally published on Zacks Investment Research (zacks.com).