Kinder Morgan's 2026 Optimism on Gas Demand Masks Persistent Overvaluation and Leverage Risks

What happened

Kinder Morgan's stock rose slightly after-hours as it signaled a stronger 2026, driven by steady natural gas demand. This aligns with its core franchise strengths, including a vast, fee-based pipeline network and substantial contracted revenue of approximately $35.7 billion. However, the announcement is a forward-looking projection that does not alter the stock's fundamental overvaluation, which sits about 40% above a conservative DCF estimate of $19.7 per share. With high leverage at 4.1x net debt/EBITDA and modest growth expectations, KMI functions more as an income-oriented bond proxy than a compelling value play. Investors should treat this news as a confirmation of operational stability but remain wary of the thin margin of safety at current prices.

Implication

The news reinforces KMI's ability to generate stable cash flows from its gas pipelines, supporting its dividend and backlog-driven growth. Yet, with the stock trading at ~22x P/E and ~12x EV/EBITDA, the market already prices in this stability generously, leaving little room for upside. High leverage of 4.1x net debt/EBITDA increases sensitivity to interest rates and potential downturns, constraining financial flexibility. Regulatory and ESG risks, such as permitting delays and policy shifts, could further dampen growth and increase costs. Therefore, a 'WAIT' stance remains prudent, with a better entry point needed near or below $20–22 per share to offer a sufficient margin of safety.

Thesis delta

The news does not shift the core investment thesis, which remains 'WAIT' due to overvaluation and leverage concerns. KMI's 2026 projection is consistent with its existing backlog and growth trajectory but fails to mitigate the stock's premium relative to intrinsic value or the balance-sheet risks. The thesis holds that only a material price decline or de-risking events, such as deleveraging or regulatory clarity, would warrant a reconsideration.