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Should You Buy Energy Transfer (ET) Ahead of Q2 Earnings Report?
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Energy Transfer LP (ET - Free Report) is expected to report an improvement in its top and bottom lines when it reports second-quarter 2024 results on Aug 7, after market close.
The Zacks Consensus Estimate for ET’s second-quarter revenues is pegged at $24.64 billion, indicating a 34.48% increase from the year-ago reported figure.
The consensus estimate for earnings is pegged at 36 cents per unit. The Zacks Consensus Estimate for ET’s second-quarter earnings has increased by 2.9% in the past 60 days. The estimate suggests year-over-year growth of 44%.
Image Source: Zacks Investment Research
Earnings Surprise History
Energy Transfer’s earnings beat the Zacks Consensus Estimate in two out of the trailing four quarters while lagging in the other two, the average surprise being 1.68%.
Image Source: Zacks Investment Research
What the Zacks Model Unveils
Our model predicts an earnings beat for Energy Transfer this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. That is the case here, as you can see below.
You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.
Earnings ESP: Energy Transfer has an Earnings ESP of +0.28%.
Zacks Rank: Energy Transfer currently carries a Zacks Rank #2.
Factors Likely to Have Shaped ET’s Q2 Earnings
Energy Transfer’s quarterly earnings are likely to have benefited from its organic expansion projects and strategic acquisitions of assets since third-quarter 2022. The acquisitions of Crestwood Equity Partners and Lotus Midstream in 2023 have expanded the firm’s operations. The well-balanced organic and inorganic asset mix of the firm is expected to have contributed strong earnings in the second quarter.
The quarter’s earnings are also expected to have gained from the strong export volumes of liquefied petroleum gas to different countries across the globe. The firm is expanding its natural gas liquids (NGL) export facilities and the capacity to export nearly 1.1 million barrels per day of NGL is likely to have boosted its performance.
Energy Transfer’s pipelines are spread across every major production basin in the United States, ensuring diverse earnings sources that are likely to have contributed to its second-quarter earnings. Fee-based contracts are expected to have generated nearly 90% of its earnings last quarter.
Price Performance and Valuation
ET’s units have gained 30.4% in the past year compared with its industry’s rally of 24.8%.
Price Performance (One year)
Image Source: Zacks Investment Research
Energy Transfer units are somewhat inexpensive on a relative basis, with its current trailing 12-month Enterprise Value/Earnings before Interest Tax Depreciation and Amortization (EV/EBITDA TTM) being 10.08 compared with the industry average of 11.31.
Image Source: Zacks Investment Research
Other operators in the space, like Plains All American Pipeline, L.P. (PAA - Free Report) and Enterprise Products Partners L.P. (EPD - Free Report) , are currently trading at a discount compared with Occidental Petroleum. EV/EBITDA TTM multiple of PAA and EPD are currently pegged at 9.14 and 9.5, respectively.
Investment Thesis
Energy Transfer is increasing the processing capacity in the Permian region to capitalize on rising demand. The firm currently has gas-fired power plants in 15 states and is evaluating incremental opportunities to serve growing power loads from new demand centers across its pipeline network. This will definitely boost its long-term growth prospects.
The firm has well-spread pipelines across the United States and is increasing its pipeline through organic means and strategic acquisitions. This is assisting the firm in serving domestic producers, exporting NGL and benefiting from the same.
Energy Transfer depends on some key producers to supply natural gas. The loss of any of these key producers is likely to have adversely impacted its financial results unless the firm is able to acquire comparable supplies of natural gas from other producers.
Summing Up
Energy Transfer continues to gain from rising demand and making proper utilization of its widespread assets across the United States. The strategic acquisitions continue to supplement organic assets and boost the performance of the company.
Despite some headwinds, it is advisable to accumulate this stock for the long term, given its, well-spread assets in the United States, cash distribution ability and focus on expanding operations through organic or inorganic methods.
Image: Bigstock
Should You Buy Energy Transfer (ET) Ahead of Q2 Earnings Report?
Energy Transfer LP (ET - Free Report) is expected to report an improvement in its top and bottom lines when it reports second-quarter 2024 results on Aug 7, after market close.
The Zacks Consensus Estimate for ET’s second-quarter revenues is pegged at $24.64 billion, indicating a 34.48% increase from the year-ago reported figure.
The consensus estimate for earnings is pegged at 36 cents per unit. The Zacks Consensus Estimate for ET’s second-quarter earnings has increased by 2.9% in the past 60 days. The estimate suggests year-over-year growth of 44%.
Earnings Surprise History
Energy Transfer’s earnings beat the Zacks Consensus Estimate in two out of the trailing four quarters while lagging in the other two, the average surprise being 1.68%.
Image Source: Zacks Investment Research
What the Zacks Model Unveils
Our model predicts an earnings beat for Energy Transfer this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. That is the case here, as you can see below.
You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.
Earnings ESP: Energy Transfer has an Earnings ESP of +0.28%.
Zacks Rank: Energy Transfer currently carries a Zacks Rank #2.
Factors Likely to Have Shaped ET’s Q2 Earnings
Energy Transfer’s quarterly earnings are likely to have benefited from its organic expansion projects and strategic acquisitions of assets since third-quarter 2022. The acquisitions of Crestwood Equity Partners and Lotus Midstream in 2023 have expanded the firm’s operations. The well-balanced organic and inorganic asset mix of the firm is expected to have contributed strong earnings in the second quarter.
The quarter’s earnings are also expected to have gained from the strong export volumes of liquefied petroleum gas to different countries across the globe. The firm is expanding its natural gas liquids (NGL) export facilities and the capacity to export nearly 1.1 million barrels per day of NGL is likely to have boosted its performance.
Energy Transfer’s pipelines are spread across every major production basin in the United States, ensuring diverse earnings sources that are likely to have contributed to its second-quarter earnings. Fee-based contracts are expected to have generated nearly 90% of its earnings last quarter.
Price Performance and Valuation
ET’s units have gained 30.4% in the past year compared with its industry’s rally of 24.8%.
Price Performance (One year)
Image Source: Zacks Investment Research
Energy Transfer units are somewhat inexpensive on a relative basis, with its current trailing 12-month Enterprise Value/Earnings before Interest Tax Depreciation and Amortization (EV/EBITDA TTM) being 10.08 compared with the industry average of 11.31.
Image Source: Zacks Investment Research
Other operators in the space, like Plains All American Pipeline, L.P. (PAA - Free Report) and Enterprise Products Partners L.P. (EPD - Free Report) , are currently trading at a discount compared with Occidental Petroleum. EV/EBITDA TTM multiple of PAA and EPD are currently pegged at 9.14 and 9.5, respectively.
Investment Thesis
Energy Transfer is increasing the processing capacity in the Permian region to capitalize on rising demand. The firm currently has gas-fired power plants in 15 states and is evaluating incremental opportunities to serve growing power loads from new demand centers across its pipeline network. This will definitely boost its long-term growth prospects.
The firm has well-spread pipelines across the United States and is increasing its pipeline through organic means and strategic acquisitions. This is assisting the firm in serving domestic producers, exporting NGL and benefiting from the same.
Energy Transfer depends on some key producers to supply natural gas. The loss of any of these key producers is likely to have adversely impacted its financial results unless the firm is able to acquire comparable supplies of natural gas from other producers.
Summing Up
Energy Transfer continues to gain from rising demand and making proper utilization of its widespread assets across the United States. The strategic acquisitions continue to supplement organic assets and boost the performance of the company.
Despite some headwinds, it is advisable to accumulate this stock for the long term, given its, well-spread assets in the United States, cash distribution ability and focus on expanding operations through organic or inorganic methods.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.