Can ET's Gas Storage Assets Unlock Growth Opportunity for the Stock?

Energy Transfer (ET) is strategically expanding its natural gas storage capabilities, notably more than doubling its Bethel facility to over 12 Bcf, positioning it to capitalize on increasing U.S. demand, LNG exports, and industrial growth. This extensive network ensures reliable, fee-based revenues from long-term contracts, providing earnings stability insulated from commodity price fluctuations. Despite outperforming its industry and projecting robust earnings growth of 9.38% and 10.71% for 2025 and 2026 respectively, ET's units are currently trading at an attractive valuation, with a trailing 12-month EV/EBITDA of 9.26x against an industry average of 10.65x.

Analysis

Energy Transfer (ET) is strategically enhancing its position within the U.S. natural gas market by expanding its storage infrastructure to capitalize on rising demand from industrial users and LNG exporters. A key project is the expansion of its Bethel storage facility, which will more than double its working gas capacity to over 12 billion cubic feet (Bcf), underpinning its ability to secure long-term, fee-based contracts that provide stable, recurring revenues insulated from commodity price volatility. This strategy is reflected in strong forward-looking projections, with the Zacks Consensus Estimate pointing to year-over-year earnings per unit growth of 9.38% in 2025 and 10.71% in 2026. Despite its units outperforming the industry over the past year with a 10.1% gain versus the industry's 2.6%, the company's valuation remains attractive. ET trades at a trailing twelve-month EV/EBITDA multiple of 9.26x, a notable discount compared to the industry average of 10.65x, suggesting that its growth prospects may not be fully priced in by the market.

Key Decisions for Investors

• Given the combination of strong projected earnings growth and a valuation discount relative to its industry peers (EV/EBITDA of 9.26x vs 10.65x), investors may consider the current valuation an attractive entry point for long-term exposure.
• The company's focus on expanding storage capacity to support fee-based contracts mitigates direct commodity price risk, making it a compelling option for investors seeking stable cash flows and earnings visibility in the energy sector.
• Key catalysts to monitor include the successful execution of the Bethel facility expansion and announcements of new long-term contracts, which would validate the projected earnings growth and could help close the valuation gap.
• Despite the positive fundamental outlook, the Zacks Rank #3 (Hold) suggests a neutral near-term stance, warranting consideration of portfolio allocation and a review of any near-term headwinds before initiating a significant position.