Financial commentator Jim Cramer has publicly endorsed Energy Transfer LP (NYSE:ET) as a "sensational" natural gas play, drawing renewed investor attention to the company despite its recent stock stagnation. This report delves into the implications of this endorsement, the company's underlying fundamentals, strategic growth initiatives, and the broader market context for the midstream energy giant.

Energy Transfer LP (NYSE:ET) has recently come under increased investor scrutiny following a public endorsement by financial commentator Jim Cramer, who characterized the natural gas pipeline operator as a "sensational" play. This renewed attention arrives as the company's stock has largely remained range-bound, prompting questions about its underlying value and future trajectory.

The Event in Detail

During a recent broadcast, a caller highlighted the apparent stagnation of ET shares, which have traded consistently around the $17 level, despite what was described as robust fundamental value. Cramer concurred with this assessment, stating,

"It's a premier natural gas play, pipeline. I think it's sensational."

He further emphasized the potential benefits for ET from a projected increase in European imports of U.S. liquified natural gas (LNG). Energy Transfer LP commands a vast energy infrastructure network across the United States, encompassing approximately 140,000 miles of pipeline and substantial storage and processing capabilities. This includes gathering, compression, treating, storage, transportation, and marketing services for natural gas, natural gas liquids, and crude oil, spanning 44 states.

Analysis of Market Reaction

The endorsement from a high-profile figure like Jim Cramer often correlates with a short-term uptick in retail investor interest and trading volume for the highlighted stock. Historically, studies have indicated that Cramer's recommendations can lead to an average risk-adjusted one-day return of 0.46%, suggesting an immediate market reaction. However, the long-term impact on ET will hinge on whether the fundamental value Cramer identifies, coupled with the anticipated demand for LNG, can translate into sustained growth and overcome the stock's recent performance plateau. While ET shares have roughly tripled over the past five years, a more recent period of stagnation around the $17 mark has been noted. The market sentiment is cautiously bullish, anticipating potential volatility as retail interest may drive short-term price movements.

Broader Context & Implications

Energy Transfer LP operates in a competitive midstream energy sector alongside peers such as Enterprise Products Partners L.P. (EPD) and Kinder Morgan (KMI). ET exhibits an EV/EBITDA ratio of 9.15X to 9.29X, which is below the industry average of approximately 10.65X, potentially indicating a relative undervaluation compared to its sector. The company's attractive 7.5% dividend yield (or $0.33 per common unit quarterly, totaling $1.32 annualized) stands out for income-oriented investors, though its payout ratio of 102.33% suggests it is currently distributing more than its earnings. ET's net leverage ratio for 2025 is estimated at 3.76, and its trailing 12-month return on equity is 11.08%.

The company's recent financial performance for the second quarter of 2025 reported net income attributable to partners of $1.16 billion, a decline from $1.31 billion in the same period of 2024. However, Adjusted EBITDA saw a slight increase to $3.87 billion from $3.76 billion year-over-year. Revenue for Q2 2025 experienced a 7.17% year-over-year decline. Growth capital expenditures were significant at $1.04 billion in Q2 2025.

Strategic growth initiatives are central to ET's future. The company secured a deadline extension for its Lake Charles LNG project, allowing exports of up to 2.33 billion cubic feet per day by December 2031. This project is bolstered by recent Sale and Purchase Agreements (SPAs), including an incremental 1.0 million tonnes per annum (mtpa) deal with Chevron U.S.A. Inc. and a 1.0 mtpa agreement with Kyushu Electric Power Company. Other notable expansions include a $5.3 billion expansion of its Transwestern Pipeline (expected Q4 2029) and the construction of a new storage cavern at its Bethel facility to double natural gas working storage capacity to over 12 Bcf. The company also recently placed several processing plants and NGL export expansions into service. As of September 2025, Energy Transfer LP was held by 36 hedge funds, indicating institutional interest.

Expert Commentary

Jim Cramer's assertion that Energy Transfer LP is "one of the largest players in the space" with "huge benefits" from European LNG imports underscores a key investment thesis. He highlighted the company's robust dividend as a benefit for investors "while you wait for the potential EU trade benefit to kick in." While Cramer's endorsements carry weight, it is pertinent to note that analysts forecast a potential upside of 29.50% for ET, with an average target price of $22.68. Conversely, some valuation models, such as GuruFocus' GF Value, estimate a downside risk of 12.79% based on a fair value of $15.27 within the next year, reflecting the inherent complexities and varied perspectives on valuation within the midstream sector.

Looking Ahead

The future performance of Energy Transfer LP is likely to be influenced by global energy demand, particularly the escalating need for natural gas to fuel artificial intelligence data centers and bolster European energy security through LNG exports. The company's substantial portfolio of ongoing and recently completed infrastructure projects, including the Lake Charles LNG project and various pipeline and processing plant expansions, positions it to capitalize on these trends. Investors will monitor the execution and timelines of these capital-intensive projects, which carry potential risks of cost overruns. While ET's fee-based contracts, accounting for approximately 90% of its EBITDA, provide a degree of revenue stability, the market will closely watch global natural gas price dynamics and any shifts in regulatory or geopolitical landscapes that could impact its expansive operations and long-term dividend sustainability. The company's management projects Adjusted EBITDA for FY2025 to be at or slightly below the lower end of the $16.1 billion to $16.5 billion range.