Kinder Morgan's third quarter set up two different stories, and investors have to weigh both. Adjusted EPS of $0.35 rose 20.7% year over year and topped the $0.33 consensus, but it fell 5.4% short of the $0.37 Earnings Whisper number. Revenue of $4.531 billion grew 9.3% and beat the $4.38 billion consensus by 3.4%. The bigger development, however, was not the quarter. Kinder Morgan added $5.4 billion of projects and lifted its expansion backlog to a record $14.4 billion, up from $9.6 billion in the second quarter. That is the central tension: near-term growth is clearly slowing, while the long-term growth runway just lengthened considerably.
The quality of the quarter deserves scrutiny in both directions. GAAP EPS of $0.34 absorbed a $138 million legal, environmental, and other accrual in Products Pipelines, which cut that segment's reported EBDA to $172 million from $288 million a year ago. A $71 million gain on the sale of three Tampa dry bulk terminals and favorable tax items partly offset the accrual. Excluding those items, every segment grew. Natural Gas Pipelines adjusted EBDA rose to $1.489 billion from $1.403 billion, Terminals to $314 million from $274 million, and CO2 to $184 million from $136 million. Cash flow, though, is being reshaped by spending. Third-quarter capital expenditures jumped to $1.045 billion from $793 million, and free cash flow after dividends was negative $120 million. Leverage still improved to 3.5 times Net Debt-to-Adjusted EBITDA, at the low end of the company's target range, against 3.8 times at the start of the year.
The deceleration is hard to dismiss. Adjusted EPS growth slowed from 41% in the first quarter to 32% in the second and 21% in the third. Adjusted EBITDA growth eased from 18% to 12% to 9% over the same stretch. Gas transport volume growth cooled to 3% from 7% in the second quarter, and gathering growth fell to 14% from 26%. Products remained soft, with refined products volumes down 3% and crude and condensate down 11%. Liquids terminal utilization slipped to 92.6% from 94.6%. Management was candid that 2026 benefited from roughly $225 million of non-recurring items, including Winter Storm Fern, a terminals buyout, a FERC true-up, and Waha-Houston Ship Channel spreads. It also cited about $175 million of commodity uplift versus budget, and cautioned that 2026 will be a tough comparison for 2027.
The guidance picture contains a nuance. Kinder Morgan reaffirmed its formal 2026 budget, but it raised its expectation for how far it will exceed that budget for the third straight quarter. It now expects Adjusted EBITDA more than 6% above budget, up from more than 5%, and Adjusted EPS more than 13% above, up from more than 12%. Expected year-end leverage holds at 3.6 times. The forward story rests on the two anchor projects. The Southeast Connector is designed for 2.6 Bcf/d, with a KMI share of about $3.1 billion and the ability to scale toward roughly 3.5 Bcf/d. Permian Link offers about 2.8 Bcf/d, is anchored by an A-rated hyperscaler, and carries a KMI share of about $1.6 billion. Both rest on 20-plus-year take-or-pay contracts, and the take-or-pay portion of the backlog is expected to earn an aggregate first-full-year multiple of about 5.7 times. Management said the growth runway now extends to 2032. The bears still have legitimate ammunition. Run-rate growth capex is rising to roughly $4 billion a year from $3 billion, pipe and compression costs are inflating, and Trident contributes only about 30% of its contracted EBITDA in 2027. The large projects also do not enter service until 2030 or later, which leaves an uneven bridge in between.
Investor sentiment remained positive but weakened, easing from 0.21 to 0.15 ahead of the report. The stock's path was more dramatic than its net change suggests. Shares sat at $33.57, just 1.7% above the open following the July report. However, they rallied about 14% from an October 1 low of $29.43 to within 2.2% of the $34.32 quarterly high set two days before earnings. The stock entered the report 5.6% above its 200-day moving average, and the Earnings Whispers price, momentum, and AVWAP trend readings were positive. A run-up of that size into the print helps explain why the whisper sat above consensus.
The bottom line is that Kinder Morgan delivered a solid but decelerating quarter that missed elevated whisper expectations, alongside a backlog step-change that materially extends its growth visibility. Investors buying the long-duration gas infrastructure story got the projects they wanted. Those focused on 2027 now face a tougher comparison, heavier capex, and a growth cadence management itself described as uneven.