BofA Securities has initiated coverage on shares of Energy Transfer (NYSE: NYSE:ET), assigning a Buy rating and setting a price target of $20.00.
The firm highlighted the stock's value, noting that even in a softening oil market, Energy Transfer remains attractively priced given its potential cash payouts if capital expenditures or acquisitions slow down.
The analyst pointed out that the company could distribute over $2.00 per share under such conditions.
The coverage notes that Energy Transfer has a solid base portfolio with unique assets in several locations, including the Dakota Access Pipeline (DAPL) and Mariner East. These assets are expected to grow alongside natural gas liquids (NGL) and crude production at a low single-digit rate with minimal capital expenditure required.
Additionally, BofA Securities sees potential "Dark Horse" upside for Energy Transfer from progress on projects like Warrior or Lake Charles. The firm's assessment suggests that these ventures could provide significant additional value to the company's already strong portfolio.
In other recent news, USA Compression (NYSE:USAC) Partners announced a leadership transition with Micah Clint Green succeeding Eric D. Long as President and CEO. Energy Transfer LP also reported a significant rise in its adjusted EBITDA for Q2 2024, reaching $3.76 billion, driven by record volumes in crude oil and natural gas liquids pipelines. The company initiated a secondary public offering of 38,755,996 of its common units, with Barclays appointed as the underwriter.
Energy Transfer also formed a joint venture with Sunoco LP, merging their crude oil and produced water gathering operations in the Permian Basin. Additionally, the company acquired WTG Midstream Holdings LLC for approximately $3.25 billion, enhancing its operations and access to natural gas and natural gas liquids in the Permian Basin.
Mizuho maintained its Outperform rating on Energy Transfer, citing its strategic investments and market position.
InvestingPro Insights
Energy Transfer's financial metrics and market position align well with BofA Securities' bullish outlook. According to InvestingPro data, the company boasts a market capitalization of $56.12 billion and a P/E ratio of 13.73, suggesting a relatively attractive valuation. This is particularly noteworthy given that the stock is trading near its 52-week high, with a price at 98.56% of its peak.
InvestingPro Tips highlight Energy Transfer's strength as a dividend payer, which supports BofA's projection of potential cash payouts. The company has maintained dividend payments for 19 consecutive years and currently offers a significant dividend yield of 7.8%. This consistent dividend history aligns with the analyst's view on the company's ability to distribute over $2.00 per share under certain conditions.
Moreover, Energy Transfer's position as a prominent player in the Oil, Gas & Consumable Fuels industry is reflected in its solid financial performance. The company reported revenue of $83.63 billion in the last twelve months, with a revenue growth of 3.56%. This growth, coupled with an EBITDA of $13.86 billion and an EBITDA growth of 15.66%, underscores the company's operational strength and potential for future cash flow generation.
For investors seeking more comprehensive analysis, InvestingPro offers additional tips and insights, with 7 more tips available for Energy Transfer on the platform.
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