Energy Transfer (ET.US) has received a "Outperform" rating from Fengye Bank! Capital expenditures support profit growth, with potential for a 30% increase in stock price.

Bank of Nova Scotia initiated coverage on American pipeline transport giant Energy Transfer (ET.US) with an "outperform" rating and a target price of $23. This target price represents nearly a 30% upside from the stock's closing price of $17.7 on Tuesday. The bank stated that the company has a "vast and integrated asset base covering various segments of the midstream value chain, truly forming a portfolio from wellhead-to-water, and is involved in all major hydrocarbon flows at different stages." Analyst Brandon Bingham from the bank said he believes Energy Transfer has significant upside potential, mainly benefiting from continued profit growth driven by short-term and long-term thematic demand. Capital expenditure growth averaging around $4.9 billion in the fiscal years 2026-2028 supports expected profit growth, creating above-average levels of free cash flow. Analysts believe that the company's current free cash flow yield is around 5% and is expected to increase to around 10% by fiscal year 2028, compared to an average of 6% for peer companies as of August 27. He noted that the "combination of tangible and thematic growth in the short term should drive Energy Transfer's valuation discount compared to peers to narrow." Analysts also mentioned that Energy Transfer is highly active in mergers and acquisitions and always maintains a high willingness to spend, keeping the company's stock price at relatively undervalued levels in the long term. Additionally, its complex corporate structure, as well as to a lesser extent, complex capital structure, further weigh down on the valuation. While the discount has not been eliminated, the analyst believes that the current valuation level is not unreasonable. He expects the discount compared to peers to not completely disappear, but to narrow down to a more reasonable range.