Energy Transfer Stock Price Increases 21.8% YTD: How to Play It Now?

Units of Energy Transfer LP ET have rallied 21.8% year to date compared with its industry's growth of 20.8%. 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 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 year-to-date period.

Price Performance YTD

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Factors Acting as Tailwinds for ET Stock

Energy Transfer owns more than 130,000 miles of pipelines across the United States and is expanding its operation through organic initiatives and strategic acquisitions. ET's operations are spread across 44 states. The firm has been making one large accretive acquisition each year since 2021. The WTG acquisition closed earlier this year expanded ET's natural gas pipeline and processing network in the Permian Basin.

Energy Transfer has a well-balanced asset mix that provides strong earnings support. ET's oil and gas pipelines, gathering and processing, and storage assets are spread in major U.S. basins and growing demand markets. The firm will invest $3-3.2 billion in 2024 to further expand and strengthen its asset base.

Energy Transfer has a NGL and Crude oil export capacity of more than 1.1 million barrels per day and 1.9 million barrels, respectively. The firm is working to increase its NGL export capabilities through the expansion of Marcus Hook and Nederland export terminals. The company's market share of worldwide NGL exports remains around 20%.

Management Ownership in ET Rises

ET's management and insiders own a sizeable chunk of its units. Management members and independent board members continue to purchase units of the firm. Energy Transfer insiders bought more than 44 million units worth $468 million since January 2021. The increasing ownership of insiders indicates bright prospects and sustainable growth amid the rising demand in the midstream space.

ET's Earnings Estimates Suggest Y/Y Rise

The Zacks Consensus Estimate for Energy Transfer's 2024 and 2025 earnings per unit indicates year-over-year growth of 28.4% and 12.6%, respectively.

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ET's Units are Undervalued

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) being 10.32 compared with the industry average of 11.62.

Another firm operating in this space, Plains All American Pipeline PAA, is also trading at a discount on an EV/EBITDA basis compared with its industry.

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Summing 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 NGL production volumes in the United States.

This can be a favorable entry point for investors, given the positive movement in earnings estimates and the firm trading at a discount. The increasing insider ownership in the firm also signals sustainable growth.

Those who already own this Zacks Rank #3 (Hold) stock would do well to retain it in their portfolios.

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