Kinder Morgan, Inc. (KMI) Earnings & Analysis

Latest quarter

Kinder Morgan reported third-quarter revenue of $4.5 billion, above the $4.4 billion consensus and up from $4.1 billion a year earlier. Adjusted earnings per share were $0.35, above the $0.33 consensus. Diluted earnings per share rose to $0.34 from $0.28.

The company’s filing attributed the revenue increase primarily to higher product sales driven by commodity prices, higher service volumes—including natural gas pipeline expansions placed into service—and higher natural gas sales volumes. It said commodity sales hedges partly offset those increases, while related costs of sales also rose.

Kinder Morgan reported higher adjusted earnings across all four business segments. The filing attributed growth in natural gas pipelines to factors including higher volumes and expansion projects. It also said legal, environmental and other accruals reduced West Coast refined-products earnings, while the terminals business recorded a $71 million net gain on asset sales.

Gross margin fell to 65.4% from 66.4%, while operating margin remained at 25.6%. Kinder Morgan reported free cash flow of $599.0 million, compared with $607.0 million a year earlier.

Adjusted EPS is the figure the consensus estimates, not the GAAP EPS above.

What management said on the call

CEO Kim Dang said the project backlog rose from $9.6 billion to $14.4 billion during the quarter. She said the additions included Southeast Connector and Permian Link, with approximately $4.7 billion representing Kinder Morgan’s share of the joint ventures. Both projects have take-or-pay contracts of at least 20 years, and Dang said they are expected to enter service between 2030 and 2032.

Dang said Southeast Connector would deliver approximately 2.6 Bcf a day of natural gas into the region, while Permian Link would move gas north to meet power demand in the Texas Panhandle. Natural Gas Pipelines President Sital Mody said Permian Link’s connection to storage could offer customers flexibility, and that the company was talking to additional potential customers.

In the discussion of 219 South, Mody estimated capital spending at roughly $1.5 billion, depending on customer interest and the project’s ultimate scope. Dang said Kinder Morgan had enough signed commitments to support a final investment decision, while other interested customers could lead the company to scale the project. Mody said the company was considering how to stage construction around customers’ different timing needs.

Asked about rising pipeline costs, Dang said steel, pipe and compression costs had increased, but the company had not seen much customer pushback. She said return thresholds still vary with risk and that customers can choose between rates that reflect different allocations of cost-overrun risk.

CFO David Michels said several potentially nonrecurring items, including winter weather and a terminals contract buyout, contributed approximately $225 million to 2026 outperformance. Favorable commodity prices contributed another $175 million versus budget. Michels said tight infrastructure creates opportunities to capture additional margin during disruptions and that he expected those conditions to persist.

Dang estimated capital spending would run around $4 billion a year for the next few years. Michels said some benefits experienced in 2026 were unlikely to recur in 2027 and declined to preview that year’s guidance.

Guidance

Kinder Morgan now expects full-year 2026 adjusted EBITDA to exceed its budget by more than 6% and adjusted EPS to exceed budget by more than 13%, CFO David Michels said. In the previous quarter, CEO Kim Dang had expected adjusted EBITDA to be at least 5% above budget and adjusted EPS to be at least 12% above the original budget.