Energy Transfer Stock Is Below $17. Time to Buy?

Core Viewpoint - Energy Transfer's units have fallen below $17, resulting in a yield exceeding 8%, prompting consideration for investment in the high-yielding master limited partnership (MLP) [1] Group 1: Performance Overview - Energy Transfer's units have declined over 15% year-to-date, contrasting with a 16% rally in the S&P 500 [3] - The primary reason for Energy Transfer's underperformance is its slowing growth rate, with adjusted EBITDA growth expected to be slightly below the lower end of the $16.1 billion to $16.5 billion guidance range, representing less than 4% growth from the previous year [4][5] Group 2: Growth Factors - The company experienced robust growth from 2020 to 2024, with a 10% compound annual growth rate in adjusted EBITDA, driven by improving market conditions, accretive acquisitions, and organic expansion projects [4] - Energy Transfer has invested $4.6 billion in growth capital projects this year and plans an additional $5 billion investment in 2026, with several expansion projects recently completed and more set to enter commercial service next year [6] Group 3: Strategic Agreements and Future Projects - The company has secured new gas supply agreements to meet the rising power demand of AI data centers, including contracts with Oracle and Entergy, with flows expected to begin by the end of this year and continuing through 2026 [7] - Energy Transfer is advancing several large-scale projects, including the $5.3 billion Desert Southwest Expansion, expected to be completed by Q4 2029, and is nearing approval for the Dakota Access North Project and Lake Charles LNG Export Terminal [8] Group 4: Valuation Insights - Energy Transfer's unit price decline has resulted in a valuation of less than nine times EBITDA, the second-lowest among large-scale energy midstream companies, compared to an average of around 12 times EBITDA [9] - Despite the current valuation discount, Energy Transfer is in a strong financial position, with expectations for growth acceleration in 2026 and beyond as expansion projects come online [10] Group 5: Investment Consideration - The current lower valuation and higher distribution yield make Energy Transfer an attractive investment opportunity, particularly for investors willing to accept the Schedule K-1 Federal Tax Form [11]