On Friday, Goldman Sachs (NYSE:GS) updated its stance on Kinder Morgan (NYSE:KMI) shares, increasing the price target to $23.00 from the previous $22.00, while maintaining a Buy rating. The revision follows Kinder Morgan's second-quarter results for 2024, where the firm acknowledged some shortfalls but identified positive indicators for future growth.
Kinder Morgan reported a slight miss in the latest quarter and provided a tempered outlook for 2024. However, the company's discussion around natural gas demand was seen as a positive sign.
Management highlighted Kinder Morgan's approximately 40% market share in Texas and mentioned ongoing negotiations for around 5 billion cubic feet per day (bcf/d) of power demand projects. Notably, 1.6 bcf/d of this is related to data center gas demand.
During the quarter, Kinder Morgan announced several initiatives, including a 1.2 bcf/d brownfield expansion to cater to the increasing power generation demand on its existing Southern Natural Gas (SNG) line, a conversion project for a crude pipeline to natural gas liquids (NGL) service, and enhancements to its CO2 emission management strategies.
Goldman Sachs has slightly raised its estimates for Kinder Morgan to reflect these project updates, anticipating higher growth in the natural gas segment in the coming years and an increase in growth capital expenditures to approximately $2 billion annually. These developments have reinforced the firm's optimistic perspective on Kinder Morgan's stock.
In light of these factors, Goldman Sachs has adjusted the valuation, leading to the new price target of $23.00. The firm's endorsement of a Buy rating remains unchanged, suggesting confidence in Kinder Morgan's capacity to leverage the expanding natural gas market.
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