Energy Transfer Earnings: Another Guidance Raise on Strong Throughput

Key Morningstar Metrics for Energy Transfer

• Fair Value Estimate
  : $24.00
• Morningstar Rating
  : ★★★★
• Morningstar Economic Moat Rating
  : None
• Morningstar Uncertainty Rating
  : Medium

What We Thought of Energy Transfer’s Earnings

Energy Transfer ET delivered a 13% adjusted EBITDA surprise over the PitchBook consensus, or $5.1 billion vs. $4.5 billion. The NGL and Midstream segments delivered 27% and 15% year-over-year EBITDA growth. EBITDA guidance increased to $18.95 billion at the midpoint from $18.4 billion.

Why it matters: Management sees stronger financial performance in all segments, as volumes are up across the footprint, with momentum anticipated to continue through the year.

• In barely a year, the market has gone from worried about NGL overcapacity to firms greenlighting new projects for the end of the decade. Energy Transfer greenlighting a fully subscribed $1 billion ethane and LPG expansion at Nederland underscores the shift.
• Natural gas will likely see new investments in the coming months, as management cited active discussions with new power consumers in its core footprint. These will likely be smaller laterals, rather than large projects such as Desert Southwest.

The bottom line: We are maintaining our $24 fair value after refreshing our model for the most recent results. We still view the firm’s diverse footprint offering multiple avenues for productive investment.

• We still see Energy Transfer as a top pick in our midstream coverage, with units trading in 4-star territory.
• Our no-moat, Poor Capital Allocation, and Medium Uncertainty ratings remain unchanged.