We are maintaining our Neutral recommendation on Energy Transfer Partners L.P. ( “>ETP ) with a price target of $54.
Energy Transfer Partners is one of the largest publicly-traded master limited partnerships (“MLPs”) with a broadly diversified asset base that includes intrastate and interstate pipelines, significant midstream and storage properties, as well as retail propane operations. Its strategicallypositioned asset portfolio maintains a strong presence in the emerging North American shale plays.
Energy Transfer has a history of achieving high returns on capital, both from acquisitions and from organic growth projects. We also like the partnership’s robust growth profile, stable fee-based operating income and strong liquidity position.
While Energy Transfer has kept its distribution unchanged for quite some time now, we expect distribution growth to resume next year, driven by the completion of a broad array of organic growth projects.
However, at the same time, we believe that the near- to medium-term outlook for Energy Transfer’s natural gas gathering and processing business continues to be weak. The partnership’s seasonal propane business also remains a major liability, in our view. Additionally, we remain concerned on account of the continued challenging operating environment, which adversely affects pipeline and terminal throughput.
As such, we expect Energy Transfer Partners’ growth potential to be restrained and see the units performing in line with the market. Our long-term Neutral recommendation is supported by Zacks #3 Rank (short-term Hold rating), in line with its large-cap pipeline MLP peers Enterprise Products Partners L.P. (EPD), Kinder Morgan Energy Partners L.P. (KMP), and Plains All American Pipeline L.P. (PAA).
ENTERPRISE PROD (EPD): Free Stock Analysis Report
ENERGY TRAN PTR (ETP): Free Stock Analysis Report
KINDER MORG ENG (KMP): Free Stock Analysis Report
PLAINS ALL AMER (PAA): Free Stock Analysis Report
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