Units of Energy Transfer LP ET have surged 21.8% year to date surpassing the industry’s growth of 20.8%. It’s akin to a sleek ship cruising easily ahead of the tumultuous waves of its counterparts. The oil and gas midstream firm boasts an extensive web of pipelines snaking across the United States, strategically positioning itself to harness the burgeoning power demands emanating from emerging consumption hubs sprawled across the network.
A leading exporter of liquefied petroleum gas, Energy Transfer is diligently expanding its natural gas liquids export facilities to meet the escalating global demand for NGL. It’s almost akin to a craftsman skillfully broadening his masterpieces to meet the escalating demand.
Impressively, the ET stock has not just outpaced its sector but has also outshone the S&P 500 in the year-to-date period, much like a seasoned marathon runner sprinting ahead of the pack.
Price Performance YTD
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Factors Propelling ET Stock
Energy Transfer’s impressive network spans more than 130,000 miles of pipelines across the United States, an illustration of its extensive reach and influence. It’s akin to a vast empire expanding its territories through a strategic blend of internal growth initiatives and shrewd acquisitions. The firm’s operational footprint spans 44 states, a testament to its robust presence nationwide. Since 2021, Energy Transfer has been augmenting its portfolio through a substantial accretive acquisition annually. The WTG acquisition, culminated earlier this year, enriched ET’s natural gas pipeline and processing network in the Permian Basin.
Boasting a well-calibrated asset mix that bolsters its earnings power, Energy Transfer’s oil and gas pipelines, along with its gathering, processing, and storage assets, are strategically dispersed across key U.S. basins and burgeoning demand hubs. Investing a projected $3-3.2 billion in 2024, the firm is poised to further fortify and expand its asset base, much like a prudent investor diversifying their portfolio for sustained growth.
Energy Transfer commands a NGL and Crude oil export capacity exceeding 1.1 million barrels per day and 1.9 million barrels per day, respectively. It’s actively ramping up its NGL export capabilities by expanding the Marcus Hook and Nederland export terminals. Moreover, the company’s share of the global NGL exports market remains robust at around 20%, akin to a seasoned player holding a substantial stake in a lucrative game.
Management’s Increased Stake in ET
ET’s management and insiders hold a noteworthy portion of its units, underlining their confidence and belief in the firm’s future. With management members and independent board members consistently acquiring ET units, Energy Transfer insiders collectively purchased more than 44 million units valued at $468 million since January 2021. This growing insider ownership reflects the bright prospects and sustainable growth potential perceived amidst the burgeoning midstream sector demand.
ET’s Buoyant Earnings Outlook
The Zacks Consensus Estimate for Energy Transfer’s 2024 and 2025 earnings per unit showcases year-over-year growth of 28.4% and 12.6%, signaling a promising trajectory ahead.
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Undervalued Potential of ET Units
Energy Transfer units present an attractive proposition, currently trading at a relative discount with a trailing 12-month Enterprise Value/Earnings before Interest Tax Depreciation and Amortization (EV/EBITDA) of 10.32 compared to the industry average of 11.62. Furthermore, Plains All American Pipeline PAA, a peer in this domain, is also positioned as a compelling investment on an EV/EBITDA basis relative to its industry.
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In Conclusion
With a sprawling infrastructure spanning over 130,000 miles and operations in 44 states, Energy Transfer is primed to leverage the upsurge in oil, natural gas, and NGL production volumes in the United States. A promising entry point for investors, supported by favorable movements in earnings estimates and the stock trading at an appealing discount. Moreover, the escalating insider ownership underscores a trajectory towards sustainable growth.
For shareholders already holding this Zacks Rank #3 (Hold) stock, retaining it in their portfolios seems prudent.