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How Do Analysts View Energy Transfer Equity?

Kurt Gallon - Author
By

Nov. 20 2020, Updated 2:53 p.m. ET

Analyst ratings for ETE

In this article, we’ll look at what Wall Street analysts recommend for Energy Transfer Equity (ETE) and its subsidiaries.

At a broad level, 50.0% of analysts rate Energy Transfer Equity as a “hold,” 41.7% rate it as a “buy,” and the remaining 8.3% rate it as a “sell.”

The median broker target price of $17 for ETE implies an 11.1% price return in the next 12 months from its July 7, 2016, closing price of $15.3. ETE’s peer Williams Companies (WMB) has “hold” ratings from 46.2% of analysts. ETE’s subsidiaries Energy Transfer Partners (ETP), Sunoco Logistics Partners (SXL), and Sunoco (SUN) have “buy” ratings from 68.8%, 58.8%, and 66.7% of analysts, respectively.

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Outlook for ETE

ETE’s outlook depends upon its subsidiaries’ abilities to grow their distributable cash flows and distributions. Let’s take a look at a few positive and negatives for the Energy Transfer franchise.

Positives

  • significant project backlog
  • long-term benefit from the rise in natural gas demand from power utilities, local distribution companies, and LNG (liquefied natural gas) exports
  • diversified business

Negatives

  • highly leveraged
  • ETP’s low distribution coverage and flat distribution
  • low drilling activity despite the recovery in crude oil prices
  • relatively high commodity price exposure through ETP’s natural gas midstream business and SXL’s crude oil acquisition and marketing business
  • difficulty maintaining high growth in the long run for a company of ETE’s size without significant inorganic opportunities

For more on master limited partnerships, you can refer to Market Realist’s Master Limited Partnerships page.

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