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?"