Should You Buy Energy Transfer While It's Below $18?

Units of Energy Transfer (NYSE: ET) have cooled off this year. They're down nearly 10% on the year and were recently below $18. That's a big shift from last year, when the master limited partnership (MLP) gained more than 41% and peaked at $21.45 per unit.

Here's a look at what has weighed on the MLP's unit price and whether its slump below $18 is a buying opportunity or if it could continue falling.

Image source: Getty Images.

Slowing growth in 2025

Last year was one for the record books for Energy Transfer. The MLP set operational records across several categories, including record crude oil transportation volumes, up 25%; and record fractionation and transportation volumes in natural gas liquids, up 9% and 7%, respectively. Those record volumes enabled the midstream giant to generate a record $15.5 billion of adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) last year, a 13.1% increase from 2023.

Acquisitions were the biggest growth catalyst last year. Energy Transfer benefited from its $7.1 billion purchase of fellow MLP Crestwood Equity Partners, which closed in late 2023. The company also bought WTG Midstream in a $3.3 billion deal in the middle of last year. On top of that, the company secured six major growth projects last year as it began to capitalize on an uptick in demand for natural gas. The biggest project was the $2.7 billion Hugh Brinson natural gas pipeline that should begin to enter service at the end of next year.

However, the company's growth engine has slowed this year. While Energy Transfer expects to grow its adjusted EBITDA to a range of $16.1 billion to $16.5 billion this year, that's only a 5% increase from last year at the midpoint. Meanwhile, the MLP hasn't secured any major new expansion projects or needle-moving acquisitions. That growth slowdown is among the factors weighing on its unit price.

About to rev back up

While Energy Transfer's growth rate has slowed this year, it appears poised to experience a resurgence in 2026 and 2027. The MLP is investing $5 billion into organic expansion projects this year, a $2 billion increase from last year. Those projects should start entering service over the second half of this year through the end of next year. Given the timing of its project completions, including the end of 2026 in-service date for Hugh Brinson, Energy Transfer expects "the majority of the earnings growth from these projects to significantly ramp up in 2026 and 2027," stated co-CEO Tom Long on the first-quarter earnings conference call.

Meanwhile, despite the lack of new project approvals this year, Energy Transfer is making progress in securing new growth opportunities. It has signed several deals supporting its proposed Lake Charles LNG export terminal, including bringing MidOcean Energy aboard as a 30% partner on the project. The company also signed what could be the first of many deals to supply gas to AI data centers. It's working on many expansion opportunities, which it could approve over the coming months.

The MLP also remains on the hunt for its next acquisition. It's in the strongest financial position in its history, putting it in excellent shape to make a deal when the right opportunity presents itself. Meanwhile, even though Energy Transfer hasn't secured an acquisition, its affiliate Sunoco has agreed to buy Parkland for $9.1 billion in a deal it expects to close later this year. Sunoco anticipates the Parkland acquisition will boost its cash flow per unit by more than 10%. With a 21% interest in Sunoco, Energy Transfer will see an earnings boost from this deal.

Even more attractive below $18

With its unit price dipping this year, Energy Transfer currently trades at the second-lowest valuation in its peer group. It also has an even higher distribution yield of 7.3%. Energy Transfer's combination of a lower valuation and a higher yield makes its dip below $18 look like a compelling buying opportunity, especially given the growth resurgence that appears ahead.

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Matt DiLallo has positions in Energy Transfer. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.