Energy Transfer's Earnings Soar on Record Volumes. Is the High-Yielding Pipeline Stock Still a Buy?

Energy Transfer (NYSE: ET) reported robust first-quarter results, fueled by record volumes. The energy midstream giant benefited from strong market conditions due to the war and its expansion initiatives. It gave the master limited partnership (MLP) the confidence to boost its full-year guidance for earnings and growth capital spending.

Here's a closer look at the pipeline company's quarter and what it sees ahead.

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Robust results in the first quarter

Energy Transfer generated over $4.9 billion of adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) in the first quarter, a 20% increase from last year. Meanwhile, it produced $2.7 billion of distributable cash flow, up 17% year-on-year. That was more than enough to cover the nearly $1.2 billion it distributed to investors. The MLP retained the rest to reinvest in expanding its operations.

The pipeline company set several volume records in the first quarter, including:

• Natural gas liquids (NGLs) and refined products terminal volumes (up 19%)
• NGL exports (up 19%)
• NGL fractionation volumes (up 11%)
• Crude oil transportation volumes (up 8%)
• Midstream gathered volumes (up 6%)

The company benefited from strong market conditions driven by war-related supply disruptions in the Middle East, which are fueling record U.S. hydrocarbon exports. Energy Transfer is also benefiting from recently completed expansion projects and acquisitions by its affiliated MLPs (Sunoco LP and USA Compression Partners).

Raising its outlook

Energy Transfer's strong first quarter and the continued robust market conditions amid the prolonged closure of the Strait of Hormuz are giving the MLP the confidence to raise its full-year earnings forecast. It now expects to generate between $18.2 billion and $18.6 billion of adjusted EBITDA this year. That's up from its initial forecast of $17.45 billion to $17.85 billion. The company's new guidance range implies its earnings will grow by 14% to 16.5% this year. That's a huge acceleration from last year when its earnings rose 3.2%.

The MLP also raised its capital spending outlook. It now expects to invest between $5.5 billion and $5.9 billion on growth capital projects this year, up from its initial $5 billion to $5.5 billion budget. Driving the spending increase are some recently approved expansion projects. Energy Transfer approved the $600 million Springerville Lateral Project (fourth-quarter 2029 in-service date), an expansion of the Bayou Bridge pipeline (first quarter 2027), and a project to expand the Florida Gas Transmission system.

Energy Transfer has a large backlog of projects with in-service dates through 2030. It also has several additional projects under development that are nearing approval. Securing additional projects would further enhance and extend its growth visibility. These projects support the MLP's plans to increase its 6.6%-yielding distribution by 3% to 5% each year.

Still worth buying

Energy Transfer's growth rate has meaningfully accelerated this year, fueled by strong market conditions and its expansion initiatives. It should continue growing briskly in the coming years as it works through its current backlog of growth capital projects. While units of the MLP are already up about 25% this year, they could have further to run, given Energy Transfer's cheap valuation and the growth it has coming down the pipeline. That makes it still look like a buy these days.

Matt DiLallo has positions in Energy Transfer. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.