(Reuters) - U.S. pipeline and terminal operator Kinder Morgan left its annual profit forecast unchanged on Wednesday, as it continued to bank on demand increase for natural gas even as President Donald Trump's sweeping tariffs sparked uncertainty across the energy industry.
While Kinder Morgan does not expect tariffs to have a significant impact on project economics, it said the uncertainty sparked by them, along with commodity prices, caused the company to be "a little bit more conservative" in communicating its annual outlook.
It expects to post an adjusted profit of $1.27 per share in 2025.
The energy sector is bracing the impact of Trump's trade policy — which includes tariffs on steel imports — as well as an escalating trade war with China and falling crude prices.
"We began efforts to mitigate the potential impact early in the quarter by preordering critical project components, negotiating caps on cost increases, and securing domestic steel and mill capacity for our larger projects, which total two-thirds of our project backlog," said CEO Kim Dang.
The impact of tariffs is expected to be roughly 1% of the total project costs, she added.
Any loss in demand for U.S. LNG in the Chinese market would be more than offset by increased imports by the European Union and Asia, the company said on a conference call.
The company, which moves roughly 40% of total U.S. natural gas output, also said it continues to have a bullish outlook for natgas demand, banking on LNG export facilities and data centers.
The Houston, Texas-based firm posted an adjusted profit of 34 cents per share in the first quarter, narrowly missing estimates of 35 cents per share, according to data compiled by LSEG. This was led by weaker earnings at its products pipelines segment and an 18.2% rise in total operating costs.
----------------------------------------------------------------------------------
Based on a $1.25/share 2025 earnings and a 23x PE suggest a price target of $28.75/share. The details are in the components in earnings as all profit number reflect 'adjusted' amounts.
Have yet to dig into the financials but it is encouraging that NG demand is strong and demand specifically LNG for export and use in data centers.
I remember that KMI charges based on volumes transported as well as the price of the commodity. I see that operating expenses are higher but that s/d eventually be covered in their current dynamic pricing model.
WMB is at/near an all time high and has a Forward PE of 26.7X. That suggest KMI may/could see $33/share if the market start to price in PE expansion.
I remain long on an over sized position. KMI's div yields 4.2 almost 1% higher than WMB. FWIW been peeling off shares of WMB and moving proceeds into DVN a domestic NG producer yielding 4.4%.
i continue to like the domestic NG business, production, pipeline and LNG demand. Remember Asia & EU continue to have huge demand for US LNG w/ or w/o tariffs. US will do a deal w/ Japan to eliminate tariffs and maybe EU will follow. That suggest continue growing demand for NG and KMI controls most/all of the US domestic pipelines. |
