Jefferies cuts Kinder Morgan stock price target on project timing

Jefferies revised its price target for Kinder Morgan Inc. (KMI) stock downward to $33, down from $35, while retaining a Hold rating. KMI's shares are currently trading at $31.31, slightly below the newly assigned target price. The firm's analysts consider the company overvalued, citing a P/E ratio of 20.2 and a PEG ratio of 0.73.

Jefferies highlighted that the firm's focus during the second half of the year is on final investment decision conversions for significant projects, which will be a key focus into the third quarter. The key late-decade projects supporting the pipeline include Southeast load, TGP 219 South, and NGPL/Permian Link, with Western Gateway expected to achieve a $50 million EBITDA run-rate by fiscal year 2030.

Despite Jefferies' more conservative outlook, the company has a history of raising dividends for eight consecutive years, offering a 3.87% yield, appealing to income-focused investors. Jefferies requires more clarity on capital and contracts to enhance the shadow backlog credit. The firm's third-quarter 2026 adjusted EBITDA estimate is 1.9% higher than the consensus, with a projected 2025-2030 compound annual growth rate of 5.1%, matching market expectations.

The $33 price target is based on mark-to-market multiples, emphasizing that named gas projects remain a critical gating factor. Upside potential hinges more on the confirmation of which major projects Kinder Morgan will actually construct, rather than simply proving demand exists. The firm's underwriting discipline around utility and investment-grade counterparties may result in slower conversion rates than the market anticipates.

In addition, Kinder Morgan reported strong second-quarter results, exceeding analyst expectations with earnings per share of $0.37 and revenue of $4.48 billion. The company raised its full-year 2026 guidance, projecting adjusted EBITDA and EPS to be at least 5% and 11% above budget, respectively. This growth has been fueled by a 12% increase in adjusted EBITDA from the previous year and a 32% boost in adjusted EPS.

Kinder Morgan's natural gas transport volumes grew by 7%, while gathering volumes experienced a significant 26% increase, particularly in the Haynesville basin. The company's balance sheet shows a net debt to adjusted EBITDA ratio of 3.6 times, indicating financial flexibility for growth projects and dividends. Net income attributable to Kinder Morgan reached $867 million, a 21% year-over-year increase, with earnings per share climbing by 22% to $0.39.