Energy Transfer LP (NYSE:ET)
Energy Transfer LP (NYSE:ET) is a Texas-based company that specializes in the transportation of natural gas and propane. It operates one of the largest pipelines in the US with its network spanning almost 120,000 miles. Compared to competitors like BP (1909) & Suncor Energy (1919) Energy Transfer is a fairly young company being founded in 1995. Despite its age, Energy Transfer has built a widely impressive gas/propane transportation infrastructure, which is a major reason for the company’s eye-watering $34 billion market cap. Despite a marketwide drawdown, the share price of Energy Transfer is hovering around $11.05, up 6.15% YTD. Combine this strength, excellent earnings, and a 233.33% increase in mentions, and it's no wonder why so many investors are asking ‘is Energy Transfer a good investment’.
Is Energy Transfer a Good Investment - Positives
Energy Transfer has been having a great few months, there are plenty of reasons why it could be a solid investment but here are the most important.
Despite the S&P 500 (one of the standard indicators for market performance) dropping by almost 17.7% YTD, Energy Transfer is up an impressive 30%. This highlights just how strong Energy Transfer is right now in comparison.
During Q1 2022, Energy Transfer reported a 21% revenue increase against the year prior. Following this, the company’s distributions (A limited partnership’s variation of dividends) were increased by 31% bringing the stock’s total yield to a massive 7.5%.
Reducing debt is cruel to the long-term success of any business. Energy Transfer has announced it will be selling a 51% stake in Energy Transfer Canada and will use the money to reduce its debt by $450 million.
The management at Energy Transfer seems to believe its impressive performance will continue as it recently increased its 2022 outlook for adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA ) from $12 billion to $12.4 billion. This is great news for investors as a positive outlook from management tends to be one of the first signs a company is poised to continue its trajectory.
Although Energy Transfer’s proposed deal for the Lake Charles export terminal has been hovering in purgatory for a while, things are beginning to flow once again as Energy Transfer recently secured four liquid natural gas supply deals.
Is Energy Transfer a Good Investment - Negatives
When deciding whether an investment is right for you, it’s equally as important to look at the negatives. Here are a couple of reasons why Energy Transfer might not be all it's cracked up to be.
While it’s true that things are looking good for Energy Transfer right now, they were suffering from slow growth for years prior to the oil/gas boom in 2022.
Although Energy Transfer is certainly looking strong when compared to the rest of the market, its numbers aren’t actually as impressive as they first seem. It posted over $5 billion in EBITDA adjusted earnings during Q1 2021, however, 2022’s figure was light in comparison at just $3.34 billion. Hopefully, we’ll see the numbers improve during Q2 but if not it might be worth reconsidering how you think Energy Transfer will hold up when oil prices return to normal.
Hype Asset of the Day - Conclusion
Overall, Energy Transfer is a well-positioned company that is primed to profit massively from the recent oil/gas boom. As Energy Transfer is primarily a transportation company, it’s unlikely to incur any unexpected costs over the rest of the year and will likely see an increase in revenue as a result of oil/gas producers ramping up their efforts to make the most of increased prices. If you’re interested in hearing about more trending stocks before anyone else, you might want to take a look at our premium plans. Alternatively, if you’d like to hear about the services offered by HypeIndex, check out our FAQ page.
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