KGS · Kodiak Gas Services
Conviction · Low · more likely to lag the S&P 500 over the next three months
Wrong if: a daily close above $53.00
Note written ·
How this view changed
- · Rating cut from Medium to Low. The note's kill line was crossed, 10 November 2026: Kodiak Gas Services shares closed at $42.26 on 10 November 2026, below the published $44.00 kill line, in the first session after a third-quarter beat and raised guidance.
- · Rated Medium. Results, 9 November 2026: Q3 2026 adjusted EPS $0.70 versus $0.62 estimate, revenue $401.8 million versus $386.8 million estimate, and full-year adjusted EBITDA guidance raised to $840-860 million.
Price against the kill line
15.7% clear of its kill line on the 13 November 2026 close.
How to read this
This note expects the shares to lag the market, so its kill line sits above the price: a close above the red mark would prove the view wrong. Prices run from low on the left to high on the right. The dot is where the stock closed on 13 November 2026, left of the mark while it is below the line; a dot right of the mark has closed through it.
The scale is stretched near the line, so close calls are easy to see. More than 8% from the line, the stock reads well clear, with a hollow dot to show the figure is off the drawn scale.
The kill line is the research note's own test. The portfolio sells on business facts, not on a price. How the portfolio decides
Three months against the kill line
Daily closes, to . Red: the kill line, a daily close above $53.00, on record since 11 November 2026. The shares are down 32.4% since the close; the S&P 500 is down 2.1% over the same sessions. Figures in the note can cover a different window.
Kill line
A daily close above $53.00, over the 50-day average and the lowest post-report broker target, which would show the shares leading again; or a second long-term data-center power contract disclosed by Form 8-K.
Research onlyNot in the portfolio.
Catalyst
Key figures from the filings · Utilities
Quarter to 30 September 2026, filed 9 November 2026; valuation at the 13 November 2026 close
- Revenue, latest quarter ($M)
- 402
- Revenue, change on a year (%)
- +24.5
- Gross margin (%)
- 64.5
- Operating margin (%)
- 34.5
- Free cash flow, four quarters ($M)
- −35.3
- Net cash, cash less debt ($M)
- −2,674
- Price to earnings (×)
- 27.3
- Enterprise value to sales (×)
- 4.9
All filed numbers
What Kodiak Gas Services reports to the SEC in its quarterly and annual filings. Each group states its period and filing date once; a figure dated otherwise says so. Built from the filings known on .
| Quarter to | Revenue ($M) | On a year (%) | Gross margin (%) | Operating margin (%) |
|---|---|---|---|---|
| first filed | 402 | +24.5 | 64.5 | 34.5 |
| first filed | 391 | +21.1 | 63.1 | 31.8 |
| first filed | 346 | +4.9 | 64.5 | 30.9 |
| first filed | 333 | +7.5 | 64.0 | 26.1 |
| first filed | 323 | −0.6 | 64.0 | 19.9 |
| first filed | 323 | +4.3 | 64.3 | 30.9 |
| Pre-tax income ($M) | 90.4 |
| Net income ($M) four quarters: 166 | 71.5 |
| Diluted shares, change on a year (%) against the quarter to 30 September 2025 | +17.4 |
| Operating cash flow ($M) | 562 |
| Capital spending ($M) | 597 |
| Free cash flow ($M) | −35.3 |
| Cash and short-term investments ($M) | 86.9 |
| Debt ($M) long-term debt | 2,761 |
| Net cash, cash less debt ($M) | −2,674 |
| Deferred revenue ($M) +59.6% on a year | 111 |
| Backlog, orders not yet delivered ($M) +78.1% on a year | 2,662 |
| Receivables ($M) | 292 |
| Inventory ($M) | 113 |
| Shareholders' equity ($M) including non-controlling interests | 2,199 |
| Market value ($M) | 4,531 |
| Enterprise value, market value plus net debt ($M) | 7,204 |
| Enterprise value to sales (×) | 4.9 |
| Enterprise value to operating income (×) | 15.8 |
| Price to earnings (×) | 27.3 |
| Price to book value (×) | 2.1 |
| Free-cash-flow yield (%) | −0.8 |
Short interest (FINRA, settled 15 October 2026, published 26 October 2026): 7.7% of shares outstanding sold short, 4.4 days of average trading to cover, −6.2% since the previous report.
| Window | Bought | Sold |
|---|---|---|
| 90 daysfrom | $544K | $1.5M |
| 12 monthsfrom | $1.2M | $341.3M |
The thesis
Kodiak Gas Services is more likely to lag the S&P 500 over the next three months. Its third-quarter 2026 report beat estimates and raised guidance, but the shares fell in the next session and four brokers cut their targets on 10 November 2026. The next tests are new signed power contracts disclosed by Form 8-K and first revenue from the 76-megawatt (MW) West Texas data-center contract in the first quarter of 2027.
The $44.00 kill line was crossed on 10 November 2026, when the shares closed at $42.26. That was the first session after the 9 November 2026 report, and the shares had closed at $44.67 on 9 November 2026. Investors sold a beat-and-raise quarter. The earlier case was that results would turn the shares, and that case failed. The rating is Low because the report was the strongest company-specific news available and still did not stop the decline.
Kodiak is moving from natural-gas compression into on-site power for data centers. The compression business is doing well, so the shares now trade on how fast and how profitably the power business grows. On 11 November 2026 the shares closed at $43.86, 43.5% below the 52-week intraday high of $77.68 set on 20 May 2026. In this note's view, that discount prices in a slower power ramp while giving compression full credit. Kodiak's own capex cut points the same way: on 9 November 2026 it lowered power growth spending because equipment is arriving later.
Bullish and bearish views on Kodiak Gas Services, Inc.
The bull case on Kodiak Gas Services, Inc. (KGS), in brief: earnings and revenue both beat. The bear case: the shares fell after good news.
Bull case
- Earnings and revenue both beat. Third-quarter 2026 adjusted earnings were $0.70 per diluted share against a $0.62 estimate, and revenue was $401.8 million against $386.8 million (company news, 9 November 2026). Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) was a record $224.5 million, up 28.5% year over year (Kodiak earnings release, Form 8-K, 9 November 2026).
- Full-year guidance moved higher. Kodiak raised full-year 2026 adjusted EBITDA guidance to $840-860 million from $830-860 million. It set discretionary cash flow guidance at $580-600 million (Form 8-K, 9 November 2026).
- Power is growing quarter on quarter. Power Infrastructure revenue was $42.0 million in the third quarter, up 27.6% from the second. Of the 413 MW fleet, 382 MW was producing revenue, and utilization rose to 92.5% from 89.6% (Form 8-K, 9 November 2026).
- Compression is running near capacity. Compression fleet utilization was 98.3% in the third quarter of 2026, and the credit-agreement leverage ratio was 3.1 times (Form 8-K, 9 November 2026).
- Brokers kept positive ratings. On 10 November 2026, Stifel kept Buy with a $90 target, RBC Capital kept Outperform at $78, Mizuho kept Outperform at $68 and Jefferies kept Buy at $52. All four are above the $43.86 close on 11 November 2026.
Bear case
- The shares fell after good news. The close dropped from $44.67 on 9 November 2026 to $42.26 on 10 November 2026, the first session after a quarter that beat on earnings and revenue. Over three months the shares are down 29.2% (adjusted daily closes, 11 November 2026).
- Four brokers cut targets in one day. Jefferies, Mizuho, RBC Capital and Stifel all lowered their targets on 10 November 2026. RBC's went to $78 from the $82 it set on 16 October 2026.
- Power spending is slipping later. Kodiak cut 2026 Power Infrastructure growth capital spending guidance to $350-400 million because equipment is arriving later (Form 8-K, 9 November 2026). Later equipment pushes power revenue later.
- Signed power backlog is still small. The only long-term power contract disclosed since mid-year is the six-year, 76 MW West Texas data-center agreement, announced on 21 September 2026. Revenue from it is expected from the first quarter of 2027.
- Executives sold steadily under trading plans. SEC Form 4 filings show eight open-market sales under Rule 10b5-1 plans between 1 September 2026 and 3 November 2026, all by officers. They include three sales by the chief executive, the last of 2,666 shares at $45.55 on 3 November 2026. The sales are small, but they add supply while the price falls.
- Resale supply is registered. A prospectus filed on 28 September 2026 covers the resale of up to 2,401,278 common shares by selling stockholders.
Price setup
The shares closed at $43.86 on 11 November 2026. That is below the 50-day moving average of $51.95 and the 200-day moving average of $58.93, both as of 11 November 2026 from adjusted daily closes. The 50-day average is below the 200-day, which shows a downtrend over several months.
The lowest recent close was $38.93 on 5 November 2026, before the report. The shares then rose to $44.67 on 9 November 2026, fell to $42.26 on 10 November 2026 and recovered to $43.86 on 11 November 2026. The 52-week intraday high is $77.68 (20 May 2026). The 52-week closing low is $32.95 (17 November 2025).
The three-month change of −29.2% is measured from the adjusted close of $61.92 on 13 August 2026. The 50-day average is well above the last close. For the shares to get back above it, they would have to recover most of their October losses.
Catalysts ahead
- 31 March 2027: End of the first-quarter 2027 window for revenue to start on the 76 MW West Texas data-center contract. Kodiak expects revenue from this contract in Q1 2027. A start on schedule would show that later equipment deliveries are not pushing back signed power revenue.
- ~March 2027 (est.): Fourth-quarter and full-year 2026 report, with the first 2027 outlook. The report shows whether 2026 adjusted EBITDA lands within $840-860 million and how much revenue-generating power capacity Kodiak has above the 382 MW reported for Q3 2026.
What would change the view
A daily close above $53.00, over the 50-day average and the lowest post-report broker target, which would show the shares leading again; or a second long-term data-center power contract disclosed by Form 8-K.
The line before it, a daily close below $44.00 set on 10 November 2026, was crossed on 10 November 2026: the shares closed at $42.26.
What it trades with
Kodiak's compression business moves with natural-gas production and Permian Basin activity. Its Power Infrastructure segment moves with demand for data-center power. In 2026 the shares have followed sentiment toward power-for-AI stocks more than compression results, which have been steady: utilization was 98.3% in the third quarter. Interest rates matter because of the 3.1 times leverage ratio and the capital needed to build the power fleet.
The evidence, claim by claim (8)
- Q3 2026 revenue $401.8 million; net income $71.5 million, $0.70 per diluted share; adjusted EBITDA a record $224.5 million, +28.5% year over year; discretionary cash flow $158.5 million. Kodiak Q3 2026 earnings release (SEC Form 8-K) · as of
- Full-year 2026 adjusted EBITDA guidance raised to $840-860 million from $830-860 million; discretionary cash flow guidance $580-600 million; Power Infrastructure growth capex cut to $350-400 million on later equipment deliveries. Kodiak Q3 2026 earnings release (SEC Form 8-K) · as of
- Power Infrastructure revenue $42.0 million (+27.6% versus Q2 2026); fleet 413 MW, revenue-generating 382 MW; utilization 92.5% versus 89.6% in Q2. Kodiak Q3 2026 earnings release (SEC Form 8-K) · as of
- Compression fleet utilization 98.3%; credit-agreement leverage ratio 3.1x; quarterly dividend $0.51 per share. Kodiak Q3 2026 earnings release (SEC Form 8-K) · as of
- Jefferies (Buy, $52), Mizuho (Outperform, $68), RBC Capital (Outperform, $78) and Stifel (Buy, $90) all lowered price targets while keeping positive ratings. Broker rating headlines, 10 November 2026 · as of
- President and CEO Robert Michael McKee sold 2,666 shares at $45.55 on 3 November 2026 under a Rule 10b5-1 plan, his third plan sale since 1 September 2026. SEC Form 4 filed 4 November 2026 · as of
- Six-year, 76 MW behind-the-meter power agreement with a West Texas data center; revenue expected from Q1 2027. Kodiak press release 21 September 2026 · as of
- Prospectus filed covering resale of up to 2,401,278 common shares by selling stockholders. Kodiak prospectus filing 28 September 2026 · as of
Sources
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