Financial Review: Energy Transfer Equity (ETE) versus Summit Midstream Partners (SMLP)

Energy Transfer Equity (NYSE: ETE) and Summit Midstream Partners (NYSE:SMLP) are both oils/energy companies, but which is the better stock? We will contrast the two companies based on the strength of their dividends, earnings, analyst recommendations, profitability, institutional ownership, valuation and risk.

Dividends

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Energy Transfer Equity pays an annual dividend of $1.22 per share and has a dividend yield of 8.6%. Summit Midstream Partners pays an annual dividend of $2.30 per share and has a dividend yield of 16.6%. Energy Transfer Equity pays out 147.0% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Summit Midstream Partners pays out 234.7% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Summit Midstream Partners has increased its dividend for 5 consecutive years. Summit Midstream Partners is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Earnings and Valuation

This table compares Energy Transfer Equity and Summit Midstream Partners’ top-line revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Energy Transfer Equity $40.52 billion 0.38 $915.00 million $0.83 17.16
Summit Midstream Partners $488.74 million 2.11 $85.68 million $0.98 14.13

Energy Transfer Equity has higher revenue and earnings than Summit Midstream Partners. Summit Midstream Partners is trading at a lower price-to-earnings ratio than Energy Transfer Equity, indicating that it is currently the more affordable of the two stocks.

Insider and Institutional Ownership

49.0% of Energy Transfer Equity shares are held by institutional investors. Comparatively, 50.4% of Summit Midstream Partners shares are held by institutional investors. 3.3% of Energy Transfer Equity shares are held by company insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a stock will outperform the market over the long term.

Volatility and Risk

Energy Transfer Equity has a beta of 1.86, indicating that its stock price is 86% more volatile than the S&P 500. Comparatively, Summit Midstream Partners has a beta of 1.79, indicating that its stock price is 79% more volatile than the S&P 500.

Analyst Ratings

This is a breakdown of current recommendations for Energy Transfer Equity and Summit Midstream Partners, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Energy Transfer Equity 0 3 11 0 2.79
Summit Midstream Partners 1 2 3 0 2.33

Energy Transfer Equity currently has a consensus target price of $21.50, indicating a potential upside of 50.98%. Summit Midstream Partners has a consensus target price of $21.33, indicating a potential upside of 54.03%. Given Summit Midstream Partners’ higher probable upside, analysts clearly believe Summit Midstream Partners is more favorable than Energy Transfer Equity.

Profitability

This table compares Energy Transfer Equity and Summit Midstream Partners’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Energy Transfer Equity 2.30% 4.48% 1.42%
Summit Midstream Partners 17.59% 12.62% 4.69%

Summary

Summit Midstream Partners beats Energy Transfer Equity on 9 of the 17 factors compared between the two stocks.

About Energy Transfer Equity

Energy Transfer Equity, L.P. (ETE) owns equity interests in Energy Transfer Partners, L.P. (ETP) and Sunoco LP, which are engaged in diversified energy-related services. The Company’s segments include Investment in ETP, including the consolidated operations of ETP; Investment in Sunoco LP, including the consolidated operations of Sunoco LP; Investment in Lake Charles LNG, including the operations of Lake Charles LNG, and Corporate and Other. Its Investment in ETP segment includes the ETP’s operations, which include intrastate transportation and storage operations; interstate transportation and storage operations; midstream operations; liquids transportation and services operations; ETP’s Investment in Sunoco Logistics; Retail Marketing operations, and ETP’s other operations and Investments. The Investment in Sunoco LP segment includes wholesale operations and retail operations. Lake Charles LNG owns a LNG import terminal and regasification facility located on Louisiana’s Gulf Coast.

About Summit Midstream Partners

Summit Midstream Partners, LP focuses on developing, owning and operating midstream energy infrastructure assets. The Company’s segments include the Utica Shale, which includes its ownership interest in Ohio Gathering, as well as Summit Utica; the Williston Basin, which includes Bison Midstream, Polar and Divide and Tioga Midstream; the Marcellus Shale, which includes Mountaineer Midstream; the Barnett Shale, which includes DFW Midstream Services LLC (DFW Midstream), and the Piceance Basin /DJ Basins, which includes Grand River and Niobrara G&P. The Company’s assets are located in the producing areas of unconventional resource basins, primarily shale formations, in the continental United States. It provides natural gas gathering, treating and processing services, as well as crude oil and produced water gathering services pursuant to long-term and fee-based agreements with its customers.

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