Following the elections and the publication of its third quarter results, Energy transfer (AND -0.35%) saw its stock hit a 52-week high and is now up more than 25% for the year as of this writing, without even taking into account its handsome distribution. Speaking of distributions, the master limited partnership (MLP) I just brought this up as well.

Against the backdrop of what is expected to be a more favorable regulatory environment and the growing energy needs resulting from the energy demand for artificial intelligence (AI), let’s take a closer look. pipeline company latest results and whether now is the right time to buy the stock.

Future growth opportunities

Energy Transfer reported strong results in the third quarter, with Adjusted EBITDA during the quarter, amounting to $3.96 billion. Distributable cash flow (DCF) to partners, which is the amount of cash generated by the company before the growth project capital expenditure (capex)up slightly by $4 million to $1.99 billion. Volumes increased strongly across all of its systems, with a number of volume records set during the quarter. This included a 25% year-over-year increase in crude volumes, a 6% increase in midstream collected volumes and a 12% increase in NGL fractionation volumes.

In October, the company increased its distribution per share by 3.2% year over year to $0.3225. It’s good for one term yield of approximately 7.4%.

Enterprise paid $1.1 billion in distributions to unitholders during the quarter, which would bring its distribution coverage ratio to 1.8 times. After paying distributions, Energy Transfer had $890 million in excess cash flow, including $724 million on growth projects during the quarter. This continues to demonstrate that Energy Transfer’s distribution is well covered.

Looking ahead, Energy Transfer maintained its full-year EBITDA guidance of between $15.3 billion and $15.5 billion. Its initial guidance at the start of the year called for EBITDA of between $14.5 billion and $14.8 billion. However, the company said there was upside potential in the fourth quarter thanks to optimization efforts and natural gas spreads, but it was cautious on spreads at this time.

Energy Transfer actually lowered its growth capital expenditure (capex) estimate for the year, now expecting to spend between $2.8 billion and $3 billion. This represents a decrease from the previous forecast of $3 billion to $3.2 billion. However, he is talking more of a rate of $2.5 billion to $3.5 billion in the future, compared to an earlier forecast of $2 billion to $3 billion.

The company said it is seeing increased power requirements across several of its pipelines due to power demands from AI and data centers, and is one of the companies best positioned to meet this demand given its gas pipeline network. The company says it has received requests to connect to about 45 power plants it doesn’t currently serve in 11 states and more than 40 potential data centers in 10 states.

Meanwhile, co-CEO Marshall McCrea said the Trump administration would bring “a breath of fresh air” to the oil and gas industry by easing regulations and enforcement measures. In particular, he believes this will help the company build LNG (liquefied natural gas) export projects.

Image source: Getty Images.

Is it time to buy Energy Transfer?

With a growing number of growth project opportunities and a likely more favorable regulatory environment, Energy Transfer finds itself in one of the strongest positions in some time. AI infrastructure development is underway, and while some companies are looking to meet their energy needs through nuclear power, natural gas will also play an important role. Natural gas projects can be completed faster than nuclear, while Enterprise’s systems around cheap associated gas from the Permian Basin put it in a good position to seize AI power opportunities.

Meanwhile, the stock is trading at an attractive price enterprise value (EV)-an EBITDA multiple of only 8.3 times. Although this figure has increased recently, the multiple is well below the level at which Energy Transfer was trading before the COVID-19 pandemic, and well below the average multiple of 13.7 at which midstream MLPs traded between 2011 and 2016.

ET EV to EBITDA (future) data by Y Charts

Between its valuation, its attractive yield, the growth opportunities available to it, and the likely improvement in the regulatory environment, Energy Transfer continues to look like a buy.