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What Analysts Recommend for ETP and ETE ahead of the 3Q17 Results

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Energy Transfer Equity

Of the analysts surveyed by Reuters, 71.0% recommend a “buy” for Energy Transfer Equity (ETE) as of October 31, 2017, and the remaining 29.0% of analysts recommend “hold.” Goldman Sachs recently upgraded ETE to “buy” from “neutral,” which is an equivalent to “hold.”

Overall, the MLP (master limited partnership) GP (general partner) has seen six rating updates since the beginning of 2017, including four upgrades, one new coverage, and one downgrade. ETE’s average target price of $20.6 implies a ~15% upside potential from its current price levels.

Energy Transfer Partners

Of the analysts tracking ETP, 75.0% recommend a “buy,” and the remaining 25.0% recommend a “hold” as of October 31. While Goldman Sachs upgraded ETE, it downgraded ETP to “neutral” from “buy.” Overall, ETP has seen four ratings updates in 2017, including two upgrades and two downgrades.

ETP’s rating downgrade could be attributed to its high cost of equity capital due to the presence of IDRs (incentive distribution rights) in its capital structure. Its cost of equity capital is expected to rise after the expiration of its IDR subsidies.

ETP is currently trading significantly below the low range ($20) of the analysts’ target price. ETP’s average target price of $26 implies a massive ~47% upside potential from its current price level.

By comparion, peers Enterprise Product Partners (EPD), Williams Partners (WPZ), and MPLX LP (MPLX) have “buy” ratings from 91.7%, 77.8%, and 94.1% of analysts, respectively.

For more pre-earnings insight on midstream companies, check out Market Realist’s Master Limited Partnerships page.

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