Kinder Morgan stock holds Buy rating at UBS on Arizona gas project

Kinder Morgan (NYSE:KMI), currently trading at $27.91 with a market capitalization of $62.1 billion, maintained its Buy rating and $38.00 price target from UBS, which highlighted the company’s potential Arizona expansion projects that could significantly increase its project backlog. The stock has demonstrated strong momentum with a 47.8% return over the past year, according to InvestingPro data.

UBS noted that on February 10, 2025, the Arizona Corporation Commission contacted stakeholders about expanding natural gas infrastructure in the state to support growing power demand. Kinder Morgan identified substantial demand for increased gas transportation to Arizona and the Desert Southwest region driven by data centers, industrial use, coal plant retirements, and population growth. The company’s strong financial position, including a reliable 4.23% dividend yield and a track record of raising dividends for seven consecutive years, positions it well for such expansion opportunities.

The company is proposing the Cooper State Connector Project and Arizona Energy Storage Projects in response to the inquiry. Expected West Coast LNG facilities with 2026 in-service dates will add approximately 0.5 Bcf/d of incremental load, further supporting the need for expanded infrastructure.

UBS believes Kinder Morgan will only proceed with the project if it meets the company’s high threshold for investment returns. Using a build multiple of 7.5x, UBS estimates the project could add incremental EBITDA of $750 million.

If Kinder Morgan moves forward with the potential "Copper State Connector" power project in Arizona, UBS expects it would meaningfully increase the company’s project backlog to $14.5 billion. For deeper insights into KMI’s valuation and growth potential, including 8 additional exclusive ProTips and comprehensive financial analysis, visit InvestingPro.

In other recent news, Kinder Morgan reported its financial results for the first quarter of 2025, with revenue reaching $4.24 billion, exceeding the forecasted $4.08 billion. However, earnings per share slightly missed expectations, coming in at $0.34 compared to the predicted $0.35. The company also announced a 2% year-over-year increase in its dividend. UBS maintained its buy rating for Kinder Morgan, highlighting the full-quarter contribution from the Outrigger acquisition as a positive factor. The firm adjusted its second-quarter 2025 EBITDA estimate to $1,932 million, positioning it slightly above the company’s guidance. Meanwhile, Stifel raised its price target for Kinder Morgan stock to $28, while maintaining a Hold rating, citing minor updates in natural gas pipelines and CO2 operations. These developments reflect ongoing strategic adjustments and financial performance insights for Kinder Morgan.

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