Units of Energy transfer (NYSE: ET) They are up more than 13% this year. That increase has raised the price of the midstream giant to around $19 per unit. Driving the recovery of master limited partnerships (MLPs) has been a combination of a reacceleration in growth and higher oil prices.
Here’s a look at whether the MLP Stock The price could reach $30 in the coming years.
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Last year was a bit of an outlier for Energy Transfer. MLP increased its adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) by 3.2%. That’s much slower than the 10% compound annual growth rate it generated between 2020 and 2024. pipeline company It had fewer growth catalysts last year, as it didn’t complete any acquisitions, only finished a few expansion projects, and oil prices plummeted.
However, this year will be different. Energy Transfer expects its adjusted earnings to rise more than 10% at the midpoint of its guidance range. The company will benefit from the launch and completion of several major expansion projects this year. Meanwhile, its two affiliated MLPs have recently completed acquisitions, which will improve their results. Additionally, oil prices are rising, which should also boost its financial results.
Energy Transfer could continue to grow at a rapid pace for years to come. It has a large pipeline of pending expansion projects, including the $2.7 billion Hugh Brinson pipeline expansion project and the $5.6 billion Transwestern pipeline expansion project. It currently has projects secured that should enter commercial service through 2030. In the meantime, it has more opportunities in the pipeline, particularly to expand its gas infrastructure to support growing demand from data centers and energy producers.
Energy Transfer has the financial flexibility to fund the growth projects it has already secured, as well as new opportunities as they arise. That includes the ability to continue making acquisitions when it finds the right deals. Given the growing demand for natural gas, Energy Transfer could continue to grow its profits at a double-digit annual rate.
If Energy Transfer can grow its earnings at a 10% annual rate, its unit price would reach $30 in about five years, if it maintained its current valuation multiple. It could reach that level even sooner if its valuation multiple starts to expand. This is certainly possible, as it trades at the lowest valuation multiple of its peer group, at less than nine times forward earnings (the average is above 11 times). If Energy Transfer maintains its accelerated growth rate and sees some expansion in its valuation, it could reach $30 per unit in the coming years.