Buy Coal for Christmas?

Natural gas pipeline giant Kinder Morgan (NYSE : KMI) announced on Tuesday that it thinks Wall Street forecasts for its 2004 earnings are very close to the mark. Kinder Morgan expects to earn approximately $3.67 per share in 2004, just shy of the Wise men's expected earnings of $3.70.

Whoever is right (and our instinct is to trust CEO and company namesake, Richard Kinder's, estimate), this would work out to 12% earnings per share growth over 2003's expected $3.29. Not too shabby, especially for a company whose profits are regulated by government tariffs and possibly threatened by dwindling supplies of the natural gas it transports.

Over the past several months, both energy producers and penny-stock hawkers have warned loudly and often that America is facing a natural gas shortage. Apparently, U.S. natural gas storage levels are nearing 30-year lows, a consequence of many electrical utilities moving to substitute natural gas for "dirty" coal and nuclear plants to supply their long-term power generation needs. Natural gas prices have reportedly gone up by up to 700% since 2000. That sounds a bit like crying wolf, but this Fool for one, has seen his gas heating costs per therm rise by about 30% in the past two years.

Perhaps the question investors should ask with respect to Kinder is not, "Is this a wonderful company, well-led, throwing off copious free cash flow and paying a respectable 2% dividend?" ( It is.) Perhaps we should be asking, "Can Kinder keep up the growth long term if electrical utilities scale back their use of natural gas in favor of cheaper fuels?"

Rich Smith owns no shares of any company mentioned in this article, although he has owned Kinder Morgan in the past. The Fool has a disclosure policy .