ET Stock Rallies Past Industry in a Month: Should You Buy or Hold?
Energy Transfer's 5.9% monthly rally is backed by fee-based cash flows, data-center demand and expansions, but high debt and lower ROE warrant caution.
Units of Energy Transfer LP ET have rallied 5.9% in the past month compared with the Zacks Oil and Gas - Production Pipeline - MLB industry’s growth of 3.1%, the Zacks Oil-Energy sector’s rally of 5.8% and the Zacks S&P 500 composite’s rise of 3.7%. This oil and gas midstream firm owns a wide network of pipelines across the United States and is pursuing opportunities to serve growing power loads from new demand centers across its network.
The firm benefits from rising demand from data centers, fee-based contracts, contracted infrastructure projects and the expanding infrastructure allows it to meet rising demand for midstream services. However, higher operating costs and lower NGL and natural gas prices are offsetting some positives.
Price Performance (One Month)
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Another firm having extensive midstream operations in the United States is Plains All American Pipeline PAA. This firm also earns a major share of its revenues from fee-based contracts with customers. In the past month, the firm gained 2.8%, underperforming its industry and sector.
Should you consider adding Energy Transfer to your portfolio solely on positive price movements? Let’s delve deeper and find out the factors that can help investors decide whether it is a good entry point to add ET stock to their portfolio.
Key Growth Drivers Supporting ET Stock’s Performance
Energy Transfer operates more than 140,000 miles of pipelines and related infrastructure across 44 U.S. states. Its diversified asset base, comprising oil and natural gas pipelines, gathering and processing systems, and storage facilities, provides stable earnings support. These assets are strategically located across major producing basins and high-growth demand centers. For 2026, the company expects growth capital expenditures of approximately $5.6-$5.9 billion, which should further expand and strengthen its operations.
Energy Transfer’s expansive network enables it to efficiently serve a diverse customer base across multiple end markets. Its strong customer relationships and largely fee-based business model provide greater cash flow visibility, with nearly 90% of revenues derived from transportation and storage services. This business mix reduces exposure to commodity price fluctuations and supports relatively stable earnings.
The company continues to expand its operations through organic growth projects, strategic acquisitions and partnerships. Energy Transfer has more than 1.3 million barrels per day of NGL export capacity and is further strengthening its export infrastructure through ongoing expansion projects at the Nederland terminals.
Steady demand from data centers is also boosting prospects of Energy Transfer. The partnership agreed to build facilities for Crusoe’s planned 900-MW AI campus expansion in Abilene. Four Oklahoma power plant connections are expected to add about 300 million cubic feet per day (MMcf/d) of demand, while management is finalizing negotiations for another 250 MMcf/d. Two Texas customers also added a combined 100 MMcf/d to existing contracts and management remains in advanced negotiations across several states.
In the second quarter of 2026, the partnership signed long-term transportation or fractionation agreements for about 300,000 barrels per day (Bbls/d) on its y-grade assets extending into the 2030s. The Nederland ethane export expansion is fully subscribed under long-term agreements running into the 2040s, adding visibility to future cash flows.
ET’s Earnings Estimates Moving up
The Zacks Consensus Estimate for Energy Transfer’s 2026 and 2027 earnings per unit indicates increases of 16.08% and 11.84%, respectively, in the past 60 days.
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Enterprise Products Partners EPD, operating in the same space, also registered a year-over-year increase in earnings per unit estimates. The 2026 earnings estimates of EPD indicate an increase of 1.68% in the past 60 days.
ET’s Units Are Trading at a Discount
ET’s current trailing 12-month Enterprise Value/Earnings before Interest Tax Depreciation and Amortization (EV/EBITDA) is 9.51X compared with the industry average of 11.22X. This indicates that the firm is presently undervalued compared with its industry.
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Plains All American Pipeline and Enterprise Products Partners are currently trading at EV/EBITDA of 10.43X and 10.96X, respectively, a discount compared with the industry both firms belong to.
ET Stock’s ROE Is Lower Than the Industry
Return on equity (“ROE”) is a financial ratio that measures how well a company uses its shareholders’ equity to generate profits. The current ROE of the company indicates that it is using shareholders’ funds more efficiently than peers.
Energy Transfer’s trailing 12-month ROE is 11.55%, lower than the industry’s 14.22%.
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ET’s Debt to Capital
Energy Transfer is currently using more debt than peers in the industry to run its operations. The current debt to capital of the firm is 57.52% compared with its industry’s 55.85%.
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Summing Up
Energy Transfer’s extensive pipeline and infrastructure network positions it to capitalize on rising U.S. oil, natural gas and NGL production. Its largely fee-based operations generate relatively stable cash flows, supporting consistent performance and long-term value creation for unitholders. The rising earnings estimate also makes the stock attractive.
However, with return on equity currently trailing the industry average and usage of debt higher than industry peers, prospective investors may want to wait for a more favorable entry opportunity before initiating a position.
Energy Transfer currently has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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Energy Transfer LP (ET): Free Stock Analysis Report
Plains All American Pipeline, L.P. (PAA): Free Stock Analysis Report
Enterprise Products Partners L.P. (EPD): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).