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Energy Transfer Earnings: Desert Southwest Pipeline Adds to Growing Gas Project Backlog

We view Energy Transfer stock as undervalued.

The Energy Transfer logo is displayed on a smartphone screen.
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Securities in This Article
Energy Transfer LP
(ET)

Key Morningstar Metrics for Energy Transfer

What We Thought of Energy Transfer’s Earnings

Energy Transfer ET reported $3.87 billion of adjusted EBITDA in the second quarter of 2025, mostly flat from the year-ago quarter. Year-to-date results are on track to meet our full-year forecast.

Why it matters: Energy Transfer saw exceptional volume growth across all its businesses in the quarter, including record-breaking volumes in midstream gathering, crude oil transportation, and natural gas liquids transportation, terminals, and exports.

  • Management guided toward the low end of its $16.1 billion-$16.5 billion adjusted EBITDA in 2025, in line with our estimate. We don’t plan to make any material changes.
  • Energy Transfer announced final plans for the $5.3 billion Desert Southwest gas pipeline, which will connect the Permian Basin to Phoenix, Arizona, primarily to serve gas power generation needs for new data centers and population growth. We expect the first full-year earnings contribution in 2030.

The bottom line: We are reaffirming our $21 fair value estimate and no-moat rating for Energy Transfer.

  • Energy Transfer’s partnership units are down 16% from their recent peak in late January and trade at a 16% discount to our fair value estimate as of Aug. 7.
  • Management raised the third-quarter distribution to $0.33 per unit, up 1% from the second-quarter distribution and 3% year over year. This is the 15th consecutive quarterly distribution increase. We expect similar growth at least until 2027.

Big picture: Energy Transfer is on track to invest $5 billion in growth projects in 2025, double its average annual run rate from the last five years.

  • Half of Energy Transfer’s project backlog is focused on natural gas, a big shift from the company’s growth investments during the last decade.

Coming up: With the Hugh Brinson phase one still more than a year from completion, Energy Transfer added a compression phase two, based on strong demand for bi-directional gas flows in Texas, primarily to serve data center demand.

Editor’s Note: This analysis was originally published as a stock note by Morningstar Equity Research.

The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar’s editorial policies.

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