2024 was a tremendous year for Kinder Morgan (KMI 0.98%), with shares of the pipeline giant rebounding dramatically, gaining 55.3% in the year, according to data provided by S&P Global Market Intelligence. With those handsome gains, Kinder Morgan stock handily beat the S&P 500 (^GSPC 1.82%), which rallied around 23% in 2024.
After a challenging 2023, Kinder Morgan expected a much stronger year ahead, driven by an acquisition and a growing backlog. With the company delivering strong numbers through 2024 and natural gas prices recovering in the second half, shares of Kinder Morgan continued to rally. The company is now about to make another acquisition, which should drive its earnings even higher in 2025.
Solid backlog, steady earnings growth
Kinder Morgan acquired NextEra Energy Partners' South Texas natural gas pipelines, or STX midstream, in December 2023 for $1.8 billion. Thanks to the acquisition, organic expansions, and lower costs, Kinder Morgan's earnings before interest, taxes, depreciation, and amortization (EBITDA) grew by 4%, while adjusted earnings per share (EPS) rose by 5% during the nine months ended Sept. 30.
Notably, Kinder Morgan ended the third quarter with a project backlog of $5.1 billion, up significantly from a backlog of $3 billion as of the end of 2023 as it continued to expand its operations steadily. While natural gas makes up the bulk of its backlog, Kinder Morgan is also investing in low-carbon energy sources such as renewable natural gas and renewable diesel.
Why 2025 could be another strong year for Kinder Morgan stock
Kinder Morgan just struck a deal with Outrigger Energy to acquire natural gas gathering and processing assets in North Dakota for $640 million. Kinder Morgan expects to complete the transaction in the first quarter and expects the acquisition to be immediately accretive to earnings. That also means Kinder Morgan could upgrade its outlook for 2025 when it reports its fourth-quarter earnings on Jan. 22, or during its next first-quarter earnings call.
Kinder Morgan last projected a 4% growth in adjusted EBITDA and 8% growth in adjusted EPS for 2025, driven by growth in all its business segments. While more than 60% of Kinder Morgan's cash flows come from natural gas, the remaining comes from other businesses like refined products pipelines, terminals, and carbon dioxide operations.
As Kinder Morgan brings expansion projects online and integrates newly acquired assets into its business, it expects its cash flows to grow and support bigger dividends. Management is confident of increasing the dividend for the eighth consecutive year in 2025, making this 4%-yielding stock a great buy for 2025 and beyond.
