S&P 500 cuts losses as Nvidia climbs ahead of results
On Monday, Citi maintained a Buy rating on Energy Transfer (NYSE:ET) stock and increased the price target from $20.00 to $22.00. The adjustment comes as Citi analysts anticipate a more robust growth trajectory for the company, driven by a projected uptick in EBITDA and substantial capital investments planned for the near term. The company, currently valued at $66.5 billion, offers an attractive 6.7% dividend yield and has maintained dividend payments for 20 consecutive years.According to InvestingPro analysis, Energy Transfer appears slightly overvalued at current levels, though it shows strong financial metrics. InvestingPro subscribers have access to 8 additional key insights about ET, along with comprehensive financial analysis and Fair Value estimates.
Energy Transfer, which operates in the energy sector, is expected to see a temporary free cash flow after dividends (FCFaD) deficit of approximately $0.7 billion in 2025. However, Citi analysts identified potential positive aspects despite this shortfall. They noted the challenge of expanding an EBITDA base that currently stands at $14.36 billion and recognized the surprise expressed by many at Energy Transfer’s $5 billion growth capital expenditure (capex) guidance. This guidance, including the capex for SUN and USAC, remains competitive among its peers when measured as a percentage of EBITDA. The company has demonstrated solid performance with 5.2% revenue growth in the last twelve months.
The management team at Energy Transfer has projected mid-teen returns on most of the new projects, with cash flows expected to begin in 2026. By that year, Citi analysts estimate that the company will become free cash flow positive, with more than $0.8 billion in FCFaD, even while maintaining a substantial growth capex budget of around $4 billion.
Citi’s revised price target reflects confidence in Energy Transfer’s extensive growth project backlog, which is anticipated to support the company’s aim to achieve the higher end of its 3-5% growth target range over multiple years. This growth is expected to be a key driver for the company’s financial performance and stock valuation in the coming years.
In other recent news, Energy Transfer reported fourth-quarter earnings that fell short of analyst expectations, with adjusted earnings per share at $0.29, missing the consensus estimate of $0.37. The company’s revenue also came in lower than expected at $19.54 billion, compared to the anticipated $21.68 billion. Despite these results, Energy Transfer achieved record financial and operating outcomes for the full year 2024, with net income of $874 million and adjusted EBITDA of $1.56 billion. Looking forward to 2025, the company projects adjusted EBITDA between $16.1 billion and $16.5 billion, with growth capital expenditures of approximately $5.0 billion.
Energy Transfer also announced an increase in its quarterly distribution, aiming for a distribution growth rate of at least 5% for 2025. In another development, the company revealed its first natural gas supply contract with Cloudburst, providing approximately 450 million cubic feet per day to a Texas data center. This agreement marks Energy Transfer’s entry into the data center supply sector. Stifel analysts, maintaining a Buy rating, raised their price target for Energy Transfer shares to $23.00, citing the company’s strong project pipeline and strategic expansion initiatives.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.