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ET Stock Outperforms its Industry in 12 Months: How to Play
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Units of Energy Transfer LP (ET - Free Report) have rallied 31.9% in the past 12 months compared with the Zacks Oil and Gas - Production Pipeline - MLB industry’s growth of 24.6%. The oil and gas midstream firm owns a wide network of pipelines across the United States and is pursuing opportunities to serve growing power loads from new demand centers across its network.
The firm is also a top exporter of liquefied petroleum gas and is working to expand natural gas liquids (NGL) export facilities to cater to the rising demand for NGL globally.
The ET stock has also outperformed its sector and the S&P 500 in the past 12 months.
Price Performance (One Year)
Image Source: Zacks Investment Research
Should you consider adding ET to your portfolio only based on positive price movements? Let’s delve deeper and find out factors that can help investors decide whether it is a good entry point to add ET stock to their portfolio.
Factors Acting as Tailwind for ET Stock
Energy Transfer owns more than 130,000 miles of pipelines across the United States and is expanding its operations through organic initiatives and acquisitions. ET’s operations are spread across 44 states. The firm has been making one large accretive acquisition each year since 2021.
Energy Transfer gains from its long-term fee-based commitments. Nearly 90% of its earnings are from fee-based contracts and 10% from commodity and spread exposure. The company has a well-balanced asset mix that provides strong earnings support. As oil and gas production volumes are rising across the United States, ET will have enough producers to utilize its pipelines for transportation.
Energy Transfer has significantly made capital investments in the past five years. Total capital expenditures for 2024 were nearly $4.6 billion, up 60% year over year. For 2025, the firm expects its growth capital expenditures of nearly $5 billion. Maintenance capital expenditures for 2025 are expected to be approximately $1.1 billion. Systematic investments are necessary to keep up with the expected increase in producer activity and provide essential midstream services.
In 2024, the firm approved the 9th fractionator at Mont Belvieu. Frac 9 will have a design capacity of 165 thousand barrels per day and is expected to be in service in late 2026. This will bring the total fractionation capacity at Mont Belvieu to more than 1.3 million barrels per day. In December 2024, the firm completed the initial phase of the Sabina 2 pipeline conversion from Mont Belvieu to Nederland. This project increased the pipeline’s capacity for multiple products from 25,000 barrels per day to nearly 40,000 barrels per day. Ultimately, by mid-2026, the firm expects to expand the pipeline to 70,000 barrels per day to meet the growing demand for natural gasoline products. The ongoing increase in volumes will continue to boost revenues.
The firm is also expanding its processing capacity in the Permian Basin to cater to the increasing demand in the region. Energy Transfer has increased processing capacity in several existing processing plants and is adding new processing capacity in Western Texas, which will bring in more revenues.
ET Shares More With Unitholders
Energy Transfer’s current quarterly cash distribution rate is 32.50 cents per Energy Transfer common unit. ET’s management has raised distribution rates 13 times in the past five years, and the current payout ratio is 101%.
ET’s Estimates Moving North
The Zacks Consensus Estimate for Energy Transfer’s 2025 and 2026 earnings per unit indicates year-over-year growth of 14.06% and 4.25% respectively.
Image Source: Zacks Investment Research
ET’s Units are Trading at a Discount
Energy Transfer units are somewhat inexpensive relative to its industry. ET’s current trailing 12-month Enterprise Value/Earnings before Interest Tax Depreciation and Amortization (EV/EBITDA) is 10.78X compared with the industry average of 12.04X. This indicates that the firm is presently undervalued compared with its industry.
Image Source: Zacks Investment Research
Another firm operating in this space, ONEOK Inc. (OKE - Free Report) , is trading at EV/EBITDA of 15.24X, at a premium compared with its industry.
ET Stock’s ROE is Lower Than Industry
Energy Transfer’s trailing 12-month return on equity is 11.56%, lower than the industry average of 14.84%. Return on equity, a profitability measure, reflects how effectively a company utilizes its shareholders’ funds to generate income.
Image Source: Zacks Investment Research
Wrapping Up
Entergy Transfer, with more than 130,000 miles of pipeline and related infrastructure in 44 states, is poised well to benefit from the improving oil, natural gas and natural gas liquid production volumes in the United States. Those who have this Zacks Rank #3 (Hold) stock in their portfolio can stay invested and enjoy the regular cash distribution.
However, as the firm’s ROE is lower than the industry, it will be a better for the investors to wait a little longer and find a better entry point.
Image: Bigstock
ET Stock Outperforms its Industry in 12 Months: How to Play
Units of Energy Transfer LP (ET - Free Report) have rallied 31.9% in the past 12 months compared with the Zacks Oil and Gas - Production Pipeline - MLB industry’s growth of 24.6%. The oil and gas midstream firm owns a wide network of pipelines across the United States and is pursuing opportunities to serve growing power loads from new demand centers across its network.
The firm is also a top exporter of liquefied petroleum gas and is working to expand natural gas liquids (NGL) export facilities to cater to the rising demand for NGL globally.
The ET stock has also outperformed its sector and the S&P 500 in the past 12 months.
Price Performance (One Year)
Image Source: Zacks Investment Research
Should you consider adding ET to your portfolio only based on positive price movements? Let’s delve deeper and find out factors that can help investors decide whether it is a good entry point to add ET stock to their portfolio.
Factors Acting as Tailwind for ET Stock
Energy Transfer owns more than 130,000 miles of pipelines across the United States and is expanding its operations through organic initiatives and acquisitions. ET’s operations are spread across 44 states. The firm has been making one large accretive acquisition each year since 2021.
Energy Transfer gains from its long-term fee-based commitments. Nearly 90% of its earnings are from fee-based contracts and 10% from commodity and spread exposure. The company has a well-balanced asset mix that provides strong earnings support. As oil and gas production volumes are rising across the United States, ET will have enough producers to utilize its pipelines for transportation.
Energy Transfer has significantly made capital investments in the past five years. Total capital expenditures for 2024 were nearly $4.6 billion, up 60% year over year. For 2025, the firm expects its growth capital expenditures of nearly $5 billion. Maintenance capital expenditures for 2025 are expected to be approximately $1.1 billion. Systematic investments are necessary to keep up with the expected increase in producer activity and provide essential midstream services.
In 2024, the firm approved the 9th fractionator at Mont Belvieu. Frac 9 will have a design capacity of 165 thousand barrels per day and is expected to be in service in late 2026. This will bring the total fractionation capacity at Mont Belvieu to more than 1.3 million barrels per day. In December 2024, the firm completed the initial phase of the Sabina 2 pipeline conversion from Mont Belvieu to Nederland. This project increased the pipeline’s capacity for multiple products from 25,000 barrels per day to nearly 40,000 barrels per day. Ultimately, by mid-2026, the firm expects to expand the pipeline to 70,000 barrels per day to meet the growing demand for natural gasoline products. The ongoing increase in volumes will continue to boost revenues.
The firm is also expanding its processing capacity in the Permian Basin to cater to the increasing demand in the region. Energy Transfer has increased processing capacity in several existing processing plants and is adding new processing capacity in Western Texas, which will bring in more revenues.
ET Shares More With Unitholders
Energy Transfer’s current quarterly cash distribution rate is 32.50 cents per Energy Transfer common unit. ET’s management has raised distribution rates 13 times in the past five years, and the current payout ratio is 101%.
ET’s Estimates Moving North
The Zacks Consensus Estimate for Energy Transfer’s 2025 and 2026 earnings per unit indicates year-over-year growth of 14.06% and 4.25% respectively.
Image Source: Zacks Investment Research
ET’s Units are Trading at a Discount
Energy Transfer units are somewhat inexpensive relative to its industry. ET’s current trailing 12-month Enterprise Value/Earnings before Interest Tax Depreciation and Amortization (EV/EBITDA) is 10.78X compared with the industry average of 12.04X. This indicates that the firm is presently undervalued compared with its industry.
Image Source: Zacks Investment Research
Another firm operating in this space, ONEOK Inc. (OKE - Free Report) , is trading at EV/EBITDA of 15.24X, at a premium compared with its industry.
ET Stock’s ROE is Lower Than Industry
Energy Transfer’s trailing 12-month return on equity is 11.56%, lower than the industry average of 14.84%. Return on equity, a profitability measure, reflects how effectively a company utilizes its shareholders’ funds to generate income.
Image Source: Zacks Investment Research
Wrapping Up
Entergy Transfer, with more than 130,000 miles of pipeline and related infrastructure in 44 states, is poised well to benefit from the improving oil, natural gas and natural gas liquid production volumes in the United States. Those who have this Zacks Rank #3 (Hold) stock in their portfolio can stay invested and enjoy the regular cash distribution.
However, as the firm’s ROE is lower than the industry, it will be a better for the investors to wait a little longer and find a better entry point.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.