Units of Energy Transfer (NYSE: ET) have rallied more than 13% this year. That surge has pushed the midstream giant’s price near $19 per unit. Fueling the master limited partnership’s (MLP) rally has been a combination of a growth reacceleration and higher oil prices.
Here’s a look at whether the MLP’s stock price could reach $30 in the coming years.
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Last year was a bit of an outlier for Energy Transfer. The MLP grew 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 delivered from 2020 through 2024. The pipeline company had fewer growth catalysts last year, as it didn’t complete any acquisitions, only finished a few expansion projects, and oil prices slumped.
However, this year will be different. Energy Transfer expects its adjusted earnings to rise by more than 10% at the midpoint of its guidance range. The company will benefit from the ramp-up and completion of several major expansion projects this year. Meanwhile, both of its affiliated MLPs have recently completed acquisitions, which will boost its bottom line. Additionally, oil prices are rising, which should also bolster its financial results.
Energy Transfer could continue to grow at an accelerated rate over the next several years. It has a large backlog of expansion projects, including the $2.7 billion Hugh Brinson Pipeline and the $5.6 billion Transwestern Pipeline expansion project. It currently has secured projects that should enter commercial service through 2030. Meanwhile, it has more opportunities in the pipeline, notably to expand its gas infrastructure to support growing demand by data centers and power producers.
Energy Transfer has the financial flexibility to fund the growth projects it has already secured, as well as new opportunities as they emerge. That includes the capacity to continue making acquisitions when it finds the right deals. Given the accelerating demand for natural gas, Energy Transfer could continue growing its earnings 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 expanding. That’s certainly possible since it trades at the lowest valuation multiple in its peer group at less than nine times forward earnings (the average is above 11x). If Energy Transfer maintains its accelerated growth rate and sees some valuation expansion, it could hit $30 a unit within the next few years.
