Should You Buy Energy Transfer Ahead of Q4 Earnings Report?

Core Viewpoint - Energy Transfer LP (ET) is anticipated to show improvements in both revenue and earnings for the fourth quarter of 2024, with a revenue estimate of $24.22 billion, reflecting a 17.95% increase year-over-year, and earnings estimated at 36 cents per unit, which has seen a 5.9% increase in estimates over the past 90 days [1][2]. Financial Performance - The Zacks Consensus Estimate for ET's fourth-quarter revenues is $24.22 billion, indicating a 17.95% increase from the previous year [2]. - The earnings estimate for the current quarter is 36 cents per unit, with a 5.9% increase in estimates over the last 90 days [2]. - Energy Transfer's earnings surprise history shows that it has beaten the Zacks Consensus Estimate in two of the last four quarters, with an average surprise of 3.43% [3][4]. Earnings Drivers - The company's earnings are expected to benefit from organic expansion projects and strategic acquisitions, particularly the WTG acquisition in the Permian Basin [8]. - The Interstate Natural Gas Pipeline segment is well-positioned to leverage changing supply and demand dynamics, while the Intrastate segment is expected to capture additional revenues from favorable changes in natural gas supply and demand [9]. - Strong export volumes of liquefied petroleum gas and the expansion of natural gas liquids (NGL) export facilities, with a capacity of nearly 1.1 million barrels per day, are likely to enhance performance [10]. - Approximately 90% of ET's earnings are generated from fee-based contracts, ensuring a consistent revenue stream [11]. Market Position and Valuation - ET's units have appreciated by 44.3% over the past year, outperforming the industry average of 33.8% [12]. - The current trailing 12-month EV/EBITDA ratio for ET is 10.85X, which is lower than the industry average of 12.19X, indicating relative undervaluation [13]. - Other operators in the sector, such as Plains All American Pipeline and Enterprise Products Partners, are trading at lower EV/EBITDA multiples of 9.56 and 10.52, respectively [15]. Strategic Outlook - Energy Transfer has over 130,000 miles of pipeline and related infrastructure across 44 states, positioning it well to benefit from increasing oil, natural gas, and natural gas liquid production in the U.S. [16]. - The company is actively pursuing opportunities to meet growing power demands, having signed agreements to provide gas loads to gas-fired power plants totaling nearly 550,000 MMBtu/d [17]. - Despite potential challenges, the company is advised for long-term accumulation due to its extensive asset base, cash distribution capabilities, and focus on growth through both organic and inorganic means [19].