ET Stock Underperforms its Industry in 3 Months: How to Play?

Core Viewpoint - Energy Transfer LP (ET) has shown a 2.3% increase in unit price over the past three months, underperforming the Zacks Oil and Gas - Production Pipeline - MLB industry's growth of 5.6% while the S&P 500 declined by 4.9% [1] Group 1: Company Overview - Energy Transfer operates a vast network of over 130,000 miles of pipelines across the United States, focusing on expanding its operations to meet growing power demands [2][6] - The company is a leading exporter of liquefied petroleum gas, serving 80 countries and territories, with major clients including Chevron and Shell [2] Group 2: Financial Performance and Growth - Energy Transfer plans to invest $6.1 billion in 2025 to enhance its asset base, indicating a commitment to growth through both organic initiatives and acquisitions [6] - The company has consistently made significant acquisitions, including the WTG acquisition, which expanded its natural gas pipeline network [7] - The Zacks Consensus Estimate predicts year-over-year earnings growth of 10.94% for 2025 and 2.75% for 2026 [14] Group 3: Revenue and Contracts - Approximately 90% of Energy Transfer's revenue is derived from long-term fee-based contracts, which mitigates risks associated with commodity price fluctuations [10] - The current quarterly cash distribution rate is 32.50 cents per common unit, with management having raised distribution rates 13 times in the past five years [16] Group 4: Market Position and Valuation - Energy Transfer units are currently trading at a trailing 12-month EV/EBITDA of 10.71X, which is lower than the industry average of 12.31X, suggesting the firm is undervalued [17] - The company's return on equity (ROE) stands at 11.56%, below the industry average of 14.22%, indicating room for improvement in profitability [20] Group 5: Insider Activity and Market Sentiment - Insiders have purchased over 44 million units worth $468 million from January 2021 to February 2025, reflecting confidence in the company's future prospects [12] - Insiders currently own nearly 10% of ET's units, which is significantly higher than peers in the industry [13] Group 6: Strategic Developments - Energy Transfer has entered a long-term agreement to supply natural gas to CloudBurst Data Center, marking its first commercial arrangement with a data center [9] - The firm is actively pursuing additional agreements with other data center developers to expand its customer base [9] Group 7: Conclusion - The combination of improving year-over-year earnings, extensive asset distribution, and a growing customer base positions Energy Transfer favorably for future growth [22]