Morningstar

Energy Transfer Earnings: Acquisitions and Organic Growth Boost Earnings

We continue to view Energy Transfer stock as undervalued.

The Energy Transfer logo is displayed on a smartphone screen.
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Securities in This Article
Energy Transfer LP
(ET)

Key Morningstar Metrics for Energy Transfer

What We Thought of Energy Transfer’s Earnings

Energy Transfer ET is on track to meet our full-year 2024 adjusted EBITDA outlook after reporting $3.96 billion of adjusted EBITDA in the third quarter, up from $3.54 billion in the third quarter of 2023.

Why it matters: System expansions, acquisitions, and other organic growth resulted in higher year-over-year volumes across most of its businesses in the third quarter.

  • Management reaffirmed its $15.4 billion midpoint EBITDA guidance, including partial-year contributions from the $3.1 billion WTG Midstream acquisition that closed in July.
  • Natural gas liquids gathering, processing, and transportation volumes were up in the quarter, which we consider a long-term positive, even though NGL segment EBITDA was down slightly due to weaker commodity margins.

The bottom line: We are reaffirming our fair value estimate of $21 per share and no-moat rating for Energy Transfer.

  • Energy Transfer’s partnership units trade at an 18% discount to our fair value estimate as of Nov. 11, after the unit price has rallied 33% year to date, including distributions.

Big picture: We expect Energy Transfer to invest an average of $3 billion in growth projects annually during the next four years, in line with management’s plan. In addition, we expect management will continue to look for acquisitions that complement its Texas and south central US footprint in particular.

  • Energy Transfer will pay a $0.3225 per unit (or $1.29 annualized) distribution in the fourth quarter, up 3% from the fourth quarter of 2023.

Coming up: The potential expansion of natural gas power generation to serve new data centers and manufacturing, especially in the central and southeast US, could boost earnings and growth investment for Energy Transfer’s gas midstream infrastructure.

Energy Transfer Stock vs. Morningstar Fair Value Estimate

Source: Morningstar Direct. Latest price as of 1:45 PM ET. Data as of Nov. 11, 2024.

The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar’s editorial policies.

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