Expect higher earnings

Energy midstream major Energy Transfer (ET) is set to report its first-quarter earnings results on May 9. It’s expected to report EBITDA of $2.60 billion for the quarter. In the same quarter last year, Energy Transfer reported EBITDA of $1.76 billion. The difference indicates a potential increase of 47% YoY (year-over-year).

In the fourth quarter of 2018, ET reported EBITDA of $2.17 billion, and its coverage ratio was 1.9x.

Will Energy Transfer’s Q1 Results Fuel Its Performance?

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Energy Transfer showed solid earnings growth last year. Almost all its segments have contributed notable growth in the last few quarters driven by production growth and its growth projects coming online. In the last three years, Energy Transfer has grown its adjusted EBITDA ~17% compounded annually.

Earnings drivers

Energy Transfer is expected to report total revenue of $14.5 billion in the first quarter of 2019 based on analysts’ consensus estimates. This represents a potential increase of almost 22% YoY. Energy Transfer’s Mariner East 2 pipeline, which carries natural gas liquids, came online early this year. Increased takeaway capacity could positively impact Energy Transfer’s first-quarter revenue.

Energy Transfer has provided a 2019 adjusted EBITDA guidance range of $10.6 billion–$10.8 billion, indicating a potential increase of ~20% YoY. Energy Transfer declared a quarterly distribution of $0.305 per unit last month, which implies an annualized distribution of $1.22 per unit and a yield of 8.1%.

It will be interesting to see how ET stock reacts to its quarterly numbers. The stock is up more than 15% so far this year, in line with the Alerian MLP ETF (AMLP).

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