ET Underperforms Its Industry in the Past Year: How to Play the Stock?

• ET trades at a discount with an EV/EBITDA multiple of 9.43X versus the industry average of 13.14X, while earnings estimates for 2026 and 2027 have risen 12.34% and 6.92% respectively over the past 60 days.
• The company's return on equity of 11.55% trails the industry's 14.22%, and its debt-to-capital ratio of 57.52% exceeds the industry average of 55.85%, raising concerns about financial flexibility.
• Management has raised distributions 19 times in five years with a current quarterly rate of 34 cents per unit, though analysts recommend waiting for a better entry point despite the company's Zacks Rank #3 (Hold) rating.

Summary

Energy Transfer LP (ET) has underperformed its industry over the past year, gaining 27.2% compared to the Zacks oil and gas storage and transportation industry's 64.6% rally and the broader sector's 39% increase.

Key Strengths:

• Operates an extensive 140,000-mile pipeline network across 44 U.S. states
• Nearly 90% of revenues are fee-based, providing stable cash flows and limited commodity price exposure
• Management has raised distributions 19 times in the past five years, with a current quarterly rate of 34 cents per unit and 92% payout ratio
• Capital spending planned at $5.6-$5.9 billion in 2026 to support growth
• Trading at a discount with EV/EBITDA of 9.43X versus industry average of 13.14X
• Earnings estimates trending upward: Zacks Consensus estimates for 2026 and 2027 EPU increased 12.34% and 6.92%, respectively, over the past 60 days

Key Concerns:

• Trailing 12-month return on equity of 11.55% below industry average of 14.22%
• Return on invested capital of 7.1% trails industry median of 9.3%
• Debt-to-capital ratio of 57.52% slightly above industry average of 55.85%
• Exposure to commodity price fluctuations, cost overruns, and potential LNG supply glut
• High capital requirements and project execution risks

Recommendation:

Despite strong fundamentals and attractive valuation, analysts suggest new investors wait for a better entry point due to elevated debt and below-industry ROE. ET maintains a Zacks Rank #3 (Hold). Competitor Plains All American Pipeline (PAA) gained 51% over the same period.