Units of Energy Transfer LP ET have surged 21.8% year to date, outpacing its industry’s growth of 20.8%. The oil and gas midstream firm boasts an extensive pipeline network across the United States and is strategically positioning itself to cater to the increasing power requirements emanating from emerging demand hubs along its network.
The company is a key player in the liquefied petroleum gas export market and is actively expanding its natural gas liquids export facilities to meet the surging global demand for NGL.
Energy Transfer has not only outperformed its sector but has also trumped the S&P 500 in the year-to-date period.
Impressive Stock Performance Year to Date
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Driving Forces Behind Energy Transfer’s Stock
Energy Transfer boasts a vast network of over 130,000 miles of pipelines across the United States and is continuously expanding through organic growth and strategic acquisitions. With operations spanning 44 states, Energy Transfer has been completing significant accretive acquisitions annually since 2021. The recent WTG acquisition, finalized earlier this year, has bolstered the company’s natural gas pipeline and processing footprint in the Permian Basin.
The firm’s well-diversified asset portfolio provides robust earnings support, with its oil and gas pipelines, gathering and processing, and storage assets strategically located in major U.S. basins and growing demand regions. Energy Transfer plans to invest $3-3.2 billion in 2024 to further enhance and fortify its asset base.
Energy Transfer also boasts an impressive NGL and Crude oil export capacity of over 1.1 million barrels per day and 1.9 million barrels, respectively. The company is actively working to expand its NGL export capabilities through the enhancement of Marcus Hook and Nederland export terminals, maintaining a 20% market share in global NGL exports.
Increased Management Ownership in Energy Transfer
The management and insiders of Energy Transfer have a significant stake in the company. Both management members and independent board members have been consistently purchasing units of the company. Since January 2021, Energy Transfer insiders have acquired over 44 million units valued at $468 million. This rising insider ownership signifies promising prospects and sustainable growth amidst escalating demand in the midstream sector.
Positive Earnings Outlook for Energy Transfer
The Zacks Consensus Estimate for Energy Transfer’s 2024 and 2025 earnings per unit point to a year-over-year growth of 28.4% and 12.6%, respectively.
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Undervalued Units of Energy Transfer
Energy Transfer’s units are relatively inexpensive, with a current trailing 12-month Enterprise Value/Earnings before Interest Tax Depreciation and Amortization (EV/EBITDA) ratio of 10.32, compared to the industry average of 11.62. Similarly, another player in this sector, Plains All American Pipeline PAA, is trading at a discount on an EV/EBITDA basis relative to its industry peers.
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Concluding Thoughts
With its extensive network of over 130,000 miles of pipeline infrastructure covering 44 states, Energy Transfer is strategically positioned to capitalize on the increasing oil, natural gas, and NGL production volumes in the United States. This presents a favorable entry opportunity for investors, considering the positive earnings forecast and the company’s undervalued trading position. The escalating insider ownership further underscores the potential for sustained growth.
Holders of this Zacks Rank #3 (Hold) stock may find it prudent to retain their position in Energy Transfer given the promising upward trajectory.
