When a caller mentioned that they have not profited from their position in Kinder Morgan, Inc. (NYSE:KMI) during the lightning round of Mad Money on September 30, Jim Cramer said:
I think Kinder Morgan is a stock that’s now undervalued. It’s come down and it shouldn’t have. It sells at 19 times earnings. That’s too cheap for me. I’m a buyer of KMI. I know it doesn’t have the yield everybody wants, but I’m a buyer.
Apart from the company, Cramer also recently showed a bullish sentiment toward Energy Transfer (ET). Additionally, he sees Enterprise Products Partners (EPD) as a pipeline winner.
Record Earnings And Natural Gas Infrastructure Demand
Kinder Morgan, Inc. reported record second-quarter results that blew past the Wall Street estimates. Its net income of $867 million was up from $715 million in the prior-year quarter. Adjusted EBITDA also reached a record $2.2 billion, an increase of 12% year-over-year, while adjusted earnings per share increased 32% to $0.37.
The company has benefited from rising demand for natural gas infrastructure tied to LNG exports, power generation and industrial activity. It ended the second quarter with a project backlog of $9.6 billion, with approximately 92% of the backlog consisting of natural gas projects. More than 60% of the backlog is associated with power generation and local distribution company demand.
Management expects 2026 adjusted EBITDA to be more than 5% above its original budget and adjusted EPS to be more than 12% above its initial outlook. The company also expects year-end net debt-to-adjusted EBITDA of approximately 3.6x.
Valuation And Capital Requirements
Kinder Morgan, Inc. trades at approximately 20.1x forward earnings. Its current annualized dividend is $1.19 per share. The forward earnings multiple is above the roughly 19x earnings figure referenced by Cramer on September 30, reflecting changes in the share price and earnings estimates since his comments. The valuation remains tied to the company’s ability to sustain earnings growth from its natural gas infrastructure projects.
The company also operates with significant debt, and its debt-to-EBITDA ratio was approximately 3.6x as of June 30. Capital-intensive pipeline and infrastructure projects require continued investment, while higher financing costs could affect future returns and financial flexibility. However, it is worth noting that while the debt-to-EBITDA ratio is high but not unusual for the sector and it is below the company’s 10-year average.
Hedge Fund Holdings And Short Interest
According to Insider Monkey’s database, 60 hedge funds held positions in Kinder Morgan, Inc. in the second quarter, compared with 62 funds in the previous quarter. Orbis Investment Management was the top hedge fund holder in Q2, as it held nearly 11.8 million shares. Short interest stood at 2.39% of the public float.
Kinder Morgan’s record quarterly earnings, natural gas project backlog and expected 2026 earnings growth can support the bullishness in Cramer’s comments, while the stock’s approximately 21-times forward earnings multiple and debt levels remain important valuation and financial considerations.
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