Energy Transfer: Tariff-Resistant Midstream Resilience

Key Points

• Energy Transfer's financial results from the past year underscore its operational excellence and provide a strong foundation for sustained investor returns.
• The company's strategic diversification into powering data centers and exporting liquified natural gas demonstrates a proactive approach to capturing future energy demand growth.
• Experts increasingly support the long-term value proposition of energy transfer, as evidenced by the growing number of positive analyst ratings and price target upgrades.

In a time of economic uncertainty and potential tariff repercussions, investors are searching for stable assets with attractive returns.

Energy Transfer LP NYSE: ET, a key player in North America's midstream energy infrastructure, has recently garnered significant attention for that reason and several others.

Despite reaching a new 52-week low earlier in the week, the stock is showing signs of a potential rebound, closing above its lows on substantial volume.

This price activity, coupled with the company's solid fundamentals, strategic direction, and an impressive dividend yield surpassing 8%, prompts the question: Does Energy Transfer present a resilient investment opportunity, especially for those worried about tariff-related challenges?

Why Pipelines Can Weather the Storm

The midstream energy sector, which includes companies like Energy Transfer, is largely unaffected by commodity price fluctuations caused by tariffs and other events. This is due to their fee-based business model, where revenue is generated from the volume of energy transported or stored rather than the commodity's price.

This provides a buffer against economic downturns, as the demand for energy transportation remains relatively stable, even during periods of uncertainty. While a severe and prolonged economic downturn could impact overall energy demand, the midstream sector's reliance on long-term contracts provides stability compared to other industries within the energy value chain.

As a result, companies like Energy Transfer are considered attractive investments during times of economic instability.

Record Results and Strategic Moves

Strong underlying fundamentals and forward-thinking strategic initiatives back Energy Transfer's potential resilience. The company delivered a record financial performance in 2024, reporting an adjusted EBITDA of $15.5 billion (up 13% year-over-year) and distributable cash flow (DCF) of $8.4 billion (up 10% YoY).

These record results, driven by healthy operational volumes across all key segments, demonstrate the profitability and cash-generating power of its asset base. This financial strength provides a solid foundation for navigating market fluctuations.

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A key attraction, particularly pronounced after the recent price dip, is Energy Transfer's substantial distribution. The company recently increased its quarterly payout to $0.3250 per unit, resulting in a $1.30 annualized distribution.

The stock price of $15.46 (April 8 close) translates to a handsome dividend yield of approximately 8.41%.

This high yield offers investors a healthy income stream, which can be particularly appealing during periods of market volatility or potential economic slowdown.

The recent increase signals management's confidence in future cash flows.

Furthermore, Energy Transfer isn't standing still—it is strategically diversifying its operations.

The company's entry into the data center power supply market via the CloudBurst Data Centers agreement taps into the massive energy needs of the digital economy. Simultaneously, the advancement of the Lake Charles LNG project (backed by a 20-year Chevron contract) targets growing global liquified natural gas (LNG) demand.

Continued investment in core infrastructure, like the Hugh Brinson pipeline in the Permian Basin, also supports future growth and cash flow stability.

Analysts Remain Bullish Despite Volatility

Despite a recent drop in share price to a 52-week low, Energy Transfers' analyst community maintains a moderate buy consensus rating. 10 of 11 analysts assigned the stock a Buy rating. The average analyst price target of $22.09 suggests a potential upside of over 42% from the April 8 closing price.

Several prominent analysts have recently reiterated or raised their price targets, indicating confidence in the company's long-term value.

Morgan Stanley increased its target to $26 with an Overweight rating, while the Royal Bank of Canada reaffirmed its outperform rating with a $23 target. Others have also given positive ratings and price targets exceeding the current trading level. Even Goldman Sachs, with the only Neutral rating, raised its price target to $20.

Opportunity Knocks? Energy Transfer's Valuation After the Dip

Energy Transfer's stock price has recently pulled back, which may concern short-term investors. However, lower valuation metrics have also made the stock more attractive to value investors.

As of April 8, the trailing price-to-earnings ratio (P/E) is around 12.07, and the price-to-book ratio (P/B) is about 1.34. These metrics, along with a price/earnings to growth ratio (P/E/G) of 0.64, suggest that the stock may be undervalued in relation to its earnings and growth potential.

The company's proactive financial management was evident in February when it successfully offered $3.0 billion in senior notes, mainly to refinance existing debt and improve its capital structure. Although the debt-to-equity ratio of 1.42 is worth noting, it's in line with industry standards for businesses with capital-intensive infrastructure. Additionally, liquidity seems sufficient based on current and quick ratios.

The company allocated a substantial $5 billion for growth capital expenditure in 2025, highlighting management's focus on investing in projects that are expected to generate future returns. For investors with a long-term view, the recent price drop could be a good opportunity to buy.

Yield, Resilience, and Rebound Potential

Despite recent share price volatility, Energy Transfer LP presents a compelling investment opportunity.

The company is showing signs of an attempted recovery from its 52-week low and operates in the relatively tariff-insulated midstream sector, offering potential resilience in the current market. Its high dividend yield, exceeding 8%, provides income potential, supported by record 2024 financial results.

Strategic diversification into high-growth areas such as data center power and LNG, coupled with strong support from analysts with high price targets, further enhances Energy Transfer's appeal. The recent price pullback may present a strategic entry point for investors seeking a balance of income and growth potential within the energy sector.