ET Stock Outperforms its Industry in 3 Months: Time to Buy or Hold?
Units of Energy Transfer LP ET have rallied 1.5% in the past three months compared with the Zacks Oil and Gas - Production Pipeline - MLB industry’s growth of 0.2%. 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.
ET's Price Performance (Three Months)
Should you consider adding ET to your portfolio only based on positive price movements? Let’s delve deeper and find out the factors that can help investors decide whether it is a good entry point to add ET stock to their portfolio.
Factors Contributing to ET Stock’s Performance
Energy Transfer is strategically positioned to benefit from its vast and diversified midstream infrastructure network, which spans nearly 140,000 miles of pipelines across North America. This integrated system, encompassing natural gas, natural gas liquids (“NGL”), crude oil and refined product transportation, provides a strong competitive advantage. The scale and connectivity of Energy Transfer’s assets allow it to capture volumes across multiple basins, including the Permian, Eagle Ford and Marcellus, while linking them efficiently to key demand centers and export hubs.
ET continues to expand its operations through a disciplined and systematic approach to acquisitions. By acquiring complementary assets with strategic synergies, the firm has enhanced its scale, diversified portfolio and created cost efficiencies. Notable transactions include the purchases of WTG Midstream, Lotus Midstream and Crestwood Equity Partners. These acquisitions have expanded ET’s footprint in high-growth basins like the Permian, Williston and Haynesville, while bolstering its natural gas and NGL infrastructure. These acquisitions not only drive volume growth but also unlock significant operational and commercial synergies.
Energy Transfer, through its systematic capital expenditure, has enhanced its long-term growth outlook. The firm, through its investment in high-return projects across the vast midstream network, strengthens operational efficiency and broadens service offerings. The firm invested $955 million in the first quarter of 2025 and plans to invest $5 billion in the full year to further expand and strengthen its infrastructure.
Energy Transfer benefits significantly from its reliance on fee-based contracts across the diversified asset portfolio. These contracts, which form the backbone of its revenue model, Energy Transfer generates nearly 90% of its earnings from fee-based contracts. The percentage of fee-based contracts effectively shields Energy Transfer from commodity price volatility, enabling it to deliver stable earnings even during market downturns.
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 10.16% and 10.64% respectively.
Another firm, Delek Logistics Partner DKL, operating in the same industry, also registered an increase in earnings estimates. The Zacks Consensus Estimate for Delek Logistics’ 2025 and 2026 earnings per unit indicates year-over-year growth of 30.43% and 13.85% respectively.
ET Shares More With Unitholders
ET’s current quarterly cash distribution rate is 32.75 cents per Energy Transfer common unit. Management has raised distribution rates 14 times in the past five years, and the current payout ratio is 98%.
Delek Logistics raised distribution rates 20 times in the past five years, and the current payout ratio is 148%.
ET’s Units are Trading at a Discount
Energy Transfer units are somewhat inexpensive relative to the industry. ET’s current trailing 12-month Enterprise Value/Earnings before Interest Tax Depreciation and Amortization (EV/EBITDA) is 10.15X compared with the industry average of 11.5X. This indicates that the firm is presently undervalued compared with its industry.
Another firm operating in this space, ONEOK Inc. OKE, is trading at an EV/EBITDA of 13.21X, 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 11.47%, lower than the industry average of 13.95%. Return on equity, a profitability measure, reflects how effectively a company utilizes its shareholders’ funds to generate income.
ONEOK’s ROE is better than the industry. ONEOK’s ROE is currently pegged at 15.58%, better than the industry average.
Summing Up
Entergy Transfer, with more than 140,000 miles of pipeline and related infrastructure, is poised well to benefit from the improving oil, natural gas and natural gas liquid production volumes in the United States. The firm, with its fee-based earnings and strategic acquisitions, is expected to create more value for its unitholders.
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 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.
This article originally published on Zacks Investment Research (zacks.com).
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