of units Energy transfer (NYSE: ET ) This year it has increased by 13 percent. The increase brought the midstream bulk price closer to $19 per unit. Fueling the master limited partnership (MLP) rally is a combination of accelerating growth and higher oil prices.
Here’s a look at whether the MLP stock The price will reach $30 in the coming years.
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Last year was a little too good for energy transfer. The MLP increased its adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) by 3.2%. This is much slower than the 10% compound annual growth from 2020 to 2024. Pipeline Company Last year had few growth catalysts, as it completed no acquisitions, completed only a few expansion projects, and oil prices fell.
However, this year will be different. Energy Transfer expects its adjusted earnings to rise more than 10%, in the middle of its guidance range. The company will benefit from the ramp-up and completion of several major expansion projects this year. Meanwhile, both of its affiliated MLPs recently completed acquisitions, which will boost its bottom line. Additionally, oil prices are rising, which should also strengthen its financial results.
Energy transmission is likely to grow rapidly in the next few years. It has a large portfolio of development projects, including the $2.7 billion Hague Branson Pipeline and the $5.6 billion Transwestern Pipeline Development Project. It currently reserves projects that should enter commercial service by 2030. At the same time, it has more opportunities in the pipeline, particularly expanding gas infrastructure to support growing demand from data centers and power producers.
Energy Transition has the financial flexibility to fund growth projects it has already secured, as well as new opportunities that arise. This includes the ability to continue making acquisitions when it finds the right deals. Given the rapid demand for natural gas, Energy Transportation can continue to grow its revenue at a double-digit annual rate.
If Energy Transfer can grow its earnings at an annual rate of 10%, its unit price will reach $30 in about five years, if it maintains multiples of its current value. It can reach this level even sooner if its value starts to expand a lot. This is actually possible because it trades with several of the lowest-valued stocks in its peer group at less than nine times forward earnings (the average is above 11x). If the energy transfer maintains its rapid growth rate and sees some value expansion, it will reach $30 per unit in the next few years.
