ET Underperforms Its Industry in Three Months: How to Play the Stock?

Units of Energy Transfer LP ET have rallied 14.1% in the past three months compared with the Zacks Oil and Gas - Production Pipeline - MLB industry’s growth of 16% and the Zacks Oil-Energy sector’s rally of 19.2%.

The oil and gas midstream firm owns a wide network of pipelines across the United States and is pursuing opportunities to serve increasing power loads from new demand centers across its network. However, an increase in operating costs and a decline in commodity prices have adversely impacted its earnings per unit in the past two reported quarters.

Price Performance (Three months)

Another firm with extensive midstream operations in the United States is Plains All American Pipeline PAA. This firm also earns a major share of its revenues from fee-based contracts with customers. In the past three months, the firm has gained 21.2%, outperforming its industry and sector.

Given the current weakness in ET’s share price, will it be a correct choice to add this oil-energy stock to your portfolio? Let us delve deeper and find out the factors that can help investors decide whether it is a good entry point to add ET stock to their portfolio.

Tailwinds That Support ET’s Operation

Energy Transfer operates more than 140,000 miles of pipelines and related infrastructure spanning 44 U.S. states. Its diversified, well-balanced asset base supports consistent earnings, with oil and gas pipelines, gathering and processing systems, and storage facilities strategically located across major U.S. basins and fast-growing demand centers.

Energy Transfer has assets strategically located in key U.S. production basins and high-demand markets, supporting a resilient earnings base. Its diversified mix of oil and gas pipelines, gathering, and processing operations and storage facilities enables efficient service across a wide range of end markets.

Most of Energy Transfer’s revenues come from fee-based contracts backed by a strong customer base. Nearly 90% of its revenues are generated through fees for transportation and storage services, which significantly reduces the company’s exposure to commodity price volatility.

In December 2025, Energy Transfer expanded the transportation capacity of Transwestern Pipeline’s proposed Desert Southwest expansion to address rising customer demand. The mainline diameter will be increased from 42 inches to 48 inches, lifting capacity to as much as 2.3 billion cubic feet per day (Bcf/d) and raising the project cost to nearly $5.6 billion. Backed by long-term contracts, the project is designed to support ongoing population growth and economic expansion across Arizona and New Mexico. Natural gas supplies will be sourced from Energy Transfer’s core assets in the Permian Basin.

Headwinds for Energy Transfer

Energy Transfer relies on a number of major producers for its natural gas supply. If these or other producers reduce the volumes they deliver, the loss of one or more key suppliers could negatively affect the company’s financial performance.

ET’s Earnings Estimates Moving North

The Zacks Consensus Estimate for Energy Transfer’s 2026 and 20227 earnings per unit indicates an increase of 1.3% and 4.4% in the past 60 days.

Another firm, operating in the space with strong operations, is Delek Logistics Partners DKL. The Zacks Consensus Estimate for Delek Logistics Partners’ 2026 and 2027 earnings per unit indicates a year-over-year decline of 0.27% and 1.78%, respectively, over the past 60 days.

Insiders Are Purchasing More ET Units

ET’s management and insiders own a sizeable chunk of its units. Management members and independent board members continue to purchase units of the firm. 

Energy Transfer’s insiders and board members have regularly added to their holdings, signaling strong confidence in its future performance and steady growth trajectory. The firm’s insider ownership is estimated at about 10%, a level that surpasses many of its industry counterparts.

Insiders’ transactions are often considered a yardstick for judging the long-term financial health of the firm.

ET’s Cash Distribution Rates

ET’s current quarterly cash distribution rate is 33.5 cents per Energy Transfer common unit. Management has raised distribution rates 17 times in the past five years, and the current payout ratio is 110%.

Delek Logistics Partners raised distribution rates 20 times in the past five years, and the current payout ratio is 144%.

ET’s Units Are Trading at a Discount

Energy Transfer units trade at a discount relative to the industry. The company’s trailing 12-month Enterprise Value-to-EBITDA ratio stands at 10.1x, below the industry average of 11.48x, indicating that it is currently undervalued compared with peers.

Plains All Pipeline is currently trading at an EV/EBITDA of 11.26x, a discount to its industry valuation.

ET Stock’s ROE is Lower Than the Industry

Energy Transfer’s trailing 12-month return on equity is 10.17%, lower than the industry average of 13.28%. Return on equity, a profitability measure, reflects how effectively a company utilizes its shareholders’ funds to generate income.

Rounding Up

Energy Transfer, operating more than 140,000 miles of pipelines and related infrastructure, is well positioned to capitalize on growing U.S. oil, natural gas and NGL production. Backed by predominantly fee-based earnings and targeted acquisitions, the company is poised to deliver durable, long-term value to unitholders.

Those who have this Zacks Rank #3 (Hold) stock in their portfolio can stay invested and enjoy the regular cash distribution. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

However, since the firm’s return on equity (ROE) lags behind the industry average, investors may want to wait for a more attractive entry point before considering a position.

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This article originally published on Zacks Investment Research (zacks.com).

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