Energy Transfer Underperforms Industry in a Month: What to Do Now?

Units of Energy Transfer LP ET have declined 0.3% over the past month against the Zacks Oil and Gas - Production Pipeline - MLB industry’s growth of 0.8%. The midstream company operates an extensive U.S. pipeline network and is targeting growth from rising power demand, but higher operating costs and weaker commodity prices are hurting its earnings.

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Other companies like Plains All American Pipeline PAA and Enterprise Products Partners EPD have gained 5% and 4%, respectively, during the said period. Plains All American earns a major share of its revenues from fee-based contracts with customers. Enterprise Products offers a resilient midstream franchise anchored by an integrated U.S. pipeline, processing, storage and export platform. Its diversified, largely fee-based contracts support steady cash flows.

Given the current underperformance in price, should you consider adding Energy Transfer to your portfolio? Let's examine the factors in detail and assess the investment prospects.

Factors Acting in Favor of ET

Energy Transfer’s diversified, well-balanced asset base supports consistent earnings, with oil and gas pipelines, gathering and processing systems and storage facilities strategically located across major U.S. basins and fast-growing data centers.

ET has assets strategically located in key U.S. production basins and high-demand markets, supporting a resilient earnings base. A major part of Energy Transfer’s revenues comes from fee-based contracts backed by a strong customer base. Nearly 90% of its revenues are generated through fees for transportation and storage services, which significantly reduces the company’s exposure to commodity price volatility.

The company reported solid operational momentum in the fourth quarter of 2025, with higher volumes across key segments compared to last year. ET saw particularly strong growth in its NGL and refined products terminal business, where volumes rose 12%, indicating increased demand for storage and export services. NGL transportation volumes climbed 5% and midstream gathering volumes increased 4%, pointing to steady upstream production activity feeding into its systems. Overall, these gains highlight broad-based demand strength across Energy Transfer’s infrastructure network.

In January 2026, ET commenced natural gas deliveries to Oracle’s data center near Abilene, TX, under the first of multiple long-term agreements to supply an aggregate of nearly 900 MMcf/d of natural gas to three Oracle data centers, two of which are located in Texas.

Challenges Faced by Energy Transfer

Energy Transfer relies on a number of major producers for its natural gas supply. If these or other producers reduce the volumes they deliver, the loss of one or more key suppliers could negatively impact the company’s financial performance.

ET’s Earnings Estimates

The Zacks Consensus Estimate for 2026 and 2027 earnings per unit indicates an increase of 23.97% and 7.75%, respectively, year over year. ET’s long-term (three to five years) earnings growth rate is 12.11%.

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The Zacks Consensus Estimate for Plains All American’s 2026 and 2027 EPU indicates an increase of 5.84% and 3.93%, respectively, year over year. PAA’s long-term earnings growth rate is 3.87%. The bottom-line estimate for Enterprise Products’ 2026 and 2027 EPU indicates an increase of 5.26% and 11.53%, respectively, year over year. EPD’s long-term earnings growth rate is 8.91%.

ET’s Earnings Surprise History

Energy Transfer beat on earnings in one of the trailing four quarters, missed in two and met in the other, delivering an average negative surprise of 8.13%.

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ET’s Return on Equity Lower Than Industry

Energy Transfer’s trailing 12-month return on equity of 10.17% is lower than the industry’s average of 12.94%. Return on equity, a profitability measure, reflects how effectively a company utilizes its shareholders’ funds to generate income.

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ET’s Cash Distribution Rates

ET’s current quarterly cash distribution rate is 33.5 cents per Energy Transfer common unit. Management has raised distribution rates 17 times in the past five years, and the current payout ratio is 110%.

ET’s Units Trading at a Discount

Energy Transfer units trade at a discount relative to the industry. The company’s trailing 12-month Enterprise Value-to-EBITDA ratio is 10.09x, below the industry average of 11.86x, indicating that it is currently undervalued compared to its peers.

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What Should Investors Do Now?

Energy Transfer benefits from a diversified U.S. asset network and largely fee-based contracts, which help provide stable earnings and limit exposure to commodity price swings. The company also reported higher volumes across key segments in the fourth quarter of 2025 and began supplying natural gas to Oracle data centers in Texas under long-term agreements.

Investors may consider holding this Zacks Rank #3 (Hold) stock for now while enjoying its regular cash distributions. Given its lower ROE, new investors may want to wait and look for a better entry point.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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