Energy Transfer's Growth Prospects Continue to Get Brighter

Energy Transfer (ET) is projecting accelerated earnings growth in 2026 and 2027, driven by $5 billion in organic expansion projects, including natural gas processing plants and pipeline expansions. While 2025 EBITDA growth is expected to be around 5%, the company anticipates a reacceleration due to these projects coming online, particularly the Hugh Brinson Pipeline; additionally, Energy Transfer is making progress on its Lake Charles LNG export terminal with multiple agreements signed, potentially leading to a final investment decision by year-end.

Analysis

Energy Transfer (ET) presents a compelling profile for income-oriented investors, currently offering a distribution yield around 7.5%, significantly above the S&P 500's sub-1.5% yield. The company projects adjusted EBITDA between $16.1 billion and $16.5 billion for the current year, representing approximately 5% year-over-year growth at the midpoint, a deceleration from the 13% growth achieved last year, which was largely acquisition-fueled. However, a reacceleration in earnings growth is anticipated for 2026 and 2027, driven by a substantial $5 billion investment in organic capital projects this year, an increase from $3 billion last year. Key projects underpinning this outlook include new natural gas processing plants, the Nederland Flexport NGL Expansion, and the Hugh Brinson Pipeline, with many expected to come online in late 2025 through 2026. Co-CEO Tom Long specifically noted that the majority of earnings growth from these projects is expected to significantly ramp up in 2026 and 2027. Beyond these, Energy Transfer is advancing its Lake Charles LNG export terminal, having recently secured a 20-year SPA with Kyushu for 1 million tons per year (MTPA), alongside two other 1 MTPA agreements and a previous 5 MTPA deal with MidOcean Energy, bringing a Final Investment Decision closer, potentially by year-end. The company is also actively pursuing opportunities to supply natural gas to over 60 power plants and around 200 data centers, leveraging its extensive pipeline network to meet rising electricity demand.

Key Decisions for Investors

• Investors seeking high current income and potential distribution growth may find Energy Transfer's approximate 7.5% yield and projected earnings reacceleration attractive, while remaining mindful of the MLP structure and associated Schedule K-1 tax reporting.
• Monitor the execution progress and in-service dates of key organic projects, particularly the Hugh Brinson Pipeline and the Lake Charles LNG facility, as their timely completion is crucial for the anticipated earnings uplift in 2026 and 2027.
• Assess the company's success in securing customer commitments for future phases of projects like the Hugh Brinson Pipeline and additional LNG offtake agreements, as these will be key indicators of sustained long-term growth beyond the current project slate.