Kinder Morgan’s project estimates rise: Why is Citi still Neutral?
The combined estimated cost of three major projects has risen from approximately 5 billion dollars to more than 6 billion dollars, prompting Citi to raise its Kinder Morgan price target to 35 dollars. But EBITDA is expected to remain broadly flat in 2027, and the company’s forward valuation already carries a premium to US peers, limiting the case for a rating upgrade.
Original source：Citi ResearchFirst published on Unhidea：Original source date：
Key takeaway
A larger project backlog has increased Kinder Morgan’s forward valuation, but a pause in near-term growth and a valuation premium to peers have led Citi to maintain its Neutral rating.
How much does the increase in project estimates change growth investment?
Citi previously estimated the combined cost of the SEC, Permian Link and TGP 219S projects at approximately 5 billion dollars. It now believes the total is trending above 6 billion dollars and has therefore raised its Kinder Morgan price target from 34 dollars to 35 dollars.
Based on management’s expected capital spending pace of approximately 4 billion dollars per year, Citi has raised its cumulative capital expenditure forecast for 2027–2030 from 14 billion dollars to 16 billion dollars. It expects this investment to drive the company’s EBITDA to a compound annual growth rate of approximately 6% through 2030.
Why might earnings fail to grow in 2027 despite more projects?
The near term faces pressure from the loss of favorable factors: Citi estimates that up to 400 million dollars in opportunistic benefits may not recur in 2027, so it expects that year’s EBITDA to be broadly flat versus 2026. There is a time lag between the expansion of the long-term project pipeline and earnings growth in the following year.
With TGP 219S set to join the backlog, six large projects will account for more than 70% of the company’s project backlog through approximately 2030. Citi expects large projects added after that to contribute mainly to results in 2030 and beyond, with their impact on growth weighted further into the future.
Why has strength in natural gas not produced faster overall growth?
Kinder Morgan is the largest natural gas transportation operator in the US. Citi believes its natural gas network advantage can generate high-return growth projects and support mid-single-digit overall growth for the company.
But the company also operates crude oil and refined products transportation, terminals and carbon dioxide businesses. Other segments are growing more slowly, and some are even declining, offsetting part of the contribution from natural gas projects. The approximately 6% growth estimate also depends on execution of existing projects and achievement of target returns; LNG production cuts or substitution of natural gas by other power generation sources could both weigh on expectations.
Why does the rating remain Neutral despite a higher price target?
The higher valuation reflects the change in project estimates. Citi continues to use a 20-year discounted cash flow valuation, with the 9.5% discount rate and approximately 7% capitalization rate unchanged. The 35-dollar price target corresponds to 12 times projected 2028 EBITDA; as earnings grow, the multiple falls to 10.2 times projected 2030 EBITDA.
But measured against projected 2030 EBITDA, Kinder Morgan’s current valuation is already approximately 1 turn higher than that of US peers, whose growth rates may be close to twice its own. Citi therefore sees greater relative value in peers and maintains its Neutral rating.
Based on the share price of 33.72 dollars on 22 October 2026, Citi’s price target implies a share price return of 3.8%; adding the estimated dividend yield of 3.5% gives an expected total return of 7.3%.
