Units of Energy Transfer LP ET rallied 53.9% in the last 12 months compared with its Zacks Oil and Gas - Production Pipeline - MLB industry’s growth of 47.8%. 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.

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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 year-to-date period.

Energy Transfer Price Performance (One Year)

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The chart below shows that ET’s units are trading above the 50-day and 200-day simple moving average, indicating a bullish trend.

Image Source: Zacks Investment Research

Improving unit price cannot be the only reason for adding Energy Transfer to your portfolio. Let us delve deeper and find out factors that can assist investors in deciding whether it is a good entry point or one needs to wait longer for a better entry point for the ET stock.

Factors Contributing to ET Stock’s Strong Performance

Energy Transfer owns more than 130,000 miles of pipelines across the United States and is expanding its operation 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. The WTG acquisition closed earlier this year, expanding 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 $2.8-$3 billion in 2024 to further expand and strengthen its asset base.

The majority of Energy Transfer’s revenues are generated from fee-based contracts and are anchored by strong customers. The firm generates nearly 90% of its revenues by charging fees for transportation and storage services it provides to its strong customer base, which significantly lowers the firm’s commodity price fluctuation risks. 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 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 by expanding Marcus Hook and Nederland export terminals. The company’s market share of worldwide NGL exports is 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.

Insider ownership in the ET stock is nearly 10%, which is more than its peers in the same industry. The increasing ownership of insiders indicates bright prospects and sustainable growth amid the rising demand in the midstream space.

ET’s Earnings Estimates Moving North

The Zacks Consensus Estimate for Energy Transfer’s 2024 and 2025 earnings per unit indicates year-over-year growth of 22.9% and 6.7%, respectively. The year-over-year increase in earnings estimates implies analysts’ increasing confidence in the stock.

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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 10.58X compared with the industry average of 12.43X. This indicates that the firm is presently undervalued compared with its industry.

Another firm operating in this space, Plains All American Pipeline PAA, is trading at EV/EBITDA of 9.01X, at a discount 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 natural gas liquid 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. Energy Transfer currently has a VGM Score of A, which indicates a strong performance.

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

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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