Energy Transfer (ET) is little changed in Wednesday’s trading as Jefferies initiated coverage with a Hold rating and $17 price target, driven by a lack of absolute growth related to the partnership’s natural gas angle and headwinds facing the natural gas liquids business amid a weaker oil macro and increasing Permian NGL competition.
Energy Transfer (ET) remains levered to its NGL businesses and thus the crude oil macro and related production developments in the Permian, and both points may represent near-term distractions at the current crude strip, Jefferies analyst Julien Dumoulin-Smith said, adding that Permian supply-push dynamics are strong, but “competition is intense – the specter of margin compression and recontacting risk could result in greater than $300 million-$400 million of negative gross profit margin impact through FY 2030.”
Energy Transfer (ET) lacks positive catalysts that could drive an upward re-rate of its discounted valuation, Dumoulin-Smith wrote while acknowleding the partnership’s strong and secure ~8% distribution yield and improved balance sheet that could allow it to undertake accretive M&A
while funding significant growth capex.