The units of natural gas pipeline operator Energy Transfer Partners LP (ETP) soared to a 52-week high of $51.00 on Monday, May 20, 2013, buoyed by a slew of positive developments. The closing price of the partnership as of the said date was also $51.00, representing an impressive year-to-date return of 13.97%. Additionally, Energy Transfer – with a market cap of $18.39 billion – boasts of a long-term expected earnings growth rate of 7.55%.
The partnership delivered positive earnings surprise of 33.33% in the recently reported first quarter. During the period, Energy Transfers’ top and bottom lines surpassed their respective Zacks Consensus Estimate. The partnership’s higher natural gas production and transportation sales complemented the results.
Energy Transfer is well positioned to compete in the natural gas midstream and transportation & storage businesses with its geographically diverse asset mix. The partnership has a significant market presence in each of its operating areas, which are located in major natural gas-producing regions of the U.S.
Additionally, Energy Transfer is ideally situated to benefit from the increasing production from unconventional sources of natural gas. With the largest intrastate system in Texas and expanding interstate assets, the partnership is connected to nearly every natural gas shale play in North America, including the Haynesville, Fayetteville and Barnett shales.
However, acquisitions have historically played a major role in the partnership’s growth profile and are expected to remain significant in the future as well. Energy Transfer may find it difficult to complete accretive transactions in the future, which could negatively impact its growth rate.
This accounts for Energy Transfers’ current Zacks Rank #3 (Hold), implying that it is expected to perform in line with the broader U.S. equity market over the next one to three months.
Meanwhile, pipeline operators like Enbridge Energy Management LLC (EEQ), Summit Midstream Partners LP (SMLP) and Kinder Morgan Management LLC (KMR) offer more value and are worth buying now. All these firms sport a Zacks Rank #2 (Buy).
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