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PAA vs. ET: Which Midstream Stock Deserves a Spot in Your Portfolio?
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Key Takeaways
PAA's 2026 earnings estimate rose 6.62% in 60 days compared to ET's 0.65% increase.
PAA reports ROE of 11.04% and debt to capital of 42.11%, outperforming ET in both metrics.
Both PAA and ET offer yields above 7%, with strong multi-year distribution growth histories.
The companies operating in the Zacks Oil and Gas – Production Pipeline industry play a critical role in the energy ecosystem by addressing growing demand through the transportation of crude oil and natural gas that fuel transportation, industrial activity, and households. In addition to ensuring a dependable energy supply, these systems bolster energy security, promote economic development, and deliver vital feedstocks for petrochemicals and fertilizers. With energy consumption on the rise, midstream companies are essential in meeting conventional energy needs while also supporting the shift toward cleaner technologies and reduced carbon emissions.
Their extensive pipeline networks provide a safe, efficient and cost-effective means of moving crude oil, natural gas and refined fuels across vast distances. This infrastructure secures a consistent supply for refineries, power plants and consumers, while offering a lower-risk, more economical alternative to rail or trucking. Two leading players in the U.S. midstream sector are Plains All American Pipeline (PAA - Free Report) and Energy Transfer (ET - Free Report) .
Plains All American Pipeline specializes in the transportation and storage of crude oil and NGLs across North America. Its vast pipeline and terminal network is largely centered in high-output areas like the Permian Basin, a key source of volume growth. The company derives most of its cash flow from long-term, fee-based contracts, which helps limit its sensitivity to commodity price volatility.
Energy Transfer, by contrast, operates a more diversified midstream platform, with assets across crude oil, NGLs, refined products and natural gas pipelines, along with storage and processing facilities. Similar to Plains, it has a strong footprint in the Permian Basin. In addition, Energy Transfer operates the Dakota Access Pipeline and owns interests in export terminals, expanding its scale and creating incremental cash flow opportunities.
Increasing hydrocarbon volumes in the United States are generating demand for midstream services. Amid such a backdrop, let’s closely compare the fundamentals of these two stocks to determine which one is better for investment now.
PAA & ET’s Earnings Growth Projections
The Zacks Consensus Estimate for Plains All American Pipeline’s 2026 earnings has increased by 6.62% in the past 60 days.
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for Energy Transfer’s 2026 earnings has moved up by 0.65% in the past 60 days.
Image Source: Zacks Investment Research
Return on Equity
Return on Equity (ROE) is an important measure of financial performance that indicates how efficiently a company converts shareholder equity into profits. It highlights management’s effectiveness in utilizing invested capital to grow earnings and enhance shareholder value.
ET’s current ROE is 10.71% compared with PAA’s 11.04%. This indicates PAA’s management is utilizing its funds marginally better than Energy Transfer.
Image Source: Zacks Investment Research
PAA and ET’s Cash Distribution
Midstream companies generate substantial cash flow primarily due to fee-based contracts and regulated tariffs that constitute a significant portion of their income. Both firms generate cash flows, a substantial portion of which is distributed among their unitholders.
Plains All American Pipeline’s current cash distribution yield is 7.92%. The firm has raised its distribution five times over the last five years. The annualized average distribution growth for the last five years is 20.5%.
Energy Transfer’s current cash distribution yield is 7.39%. The firm has raised its distribution 16 times in the last five years. The annualized average distribution growth for the last five years is 21%.
Debt to Capital
The oil and gas midstream industry is capital-intensive; the firms operating in this space need to borrow to fund their capital projects. At present, ET’s debt to capital is 58.19% compared with its industry average of 56.63%. PAA’s debt to capital is 42.11%.
Image Source: Zacks Investment Research
Valuation
Plains All American Pipeline’s units are somewhat inexpensive relative to the industry. PAA’s current trailing 12-month Enterprise Value/Earnings before Interest, Tax, Depreciation and Amortization (EV/EBITDA) is 10.63X compared with the industry average of 10.91X. This indicates that the firm is presently undervalued compared with its industry.
Energy Transfer is trading at an EV/EBITDA of 9.31X, at a discount compared with its industry.
Price Performance
Plains All American Pipeline’s units have gained 4% in the past six months compared with Energy Transfer’s rally of 1.2%.
Price Performance (Six months)
Image Source: Zacks Investment Research
Summing Up
PAA and ET deliver efficient services across their respective operating regions, supported by extensive infrastructure in the prolific Permian Basin.
Plains All American Pipeline mainly focuses on the transportation and storage of crude oil and natural gas liquids, relying on a fee-based model that helps cushion it from commodity price volatility. Energy Transfer, while more diversified with assets that include natural gas pipelines and storage, has encountered challenges tied to its higher debt levels.
Both stocks currently carry a Zacks Rank #3 (Hold). Yet, Plains All American Pipeline is a better pick for investors based on its lower debt levels, stronger earnings estimate movement, and a better ROE compared with Energy Transfer.
Image: Bigstock
PAA vs. ET: Which Midstream Stock Deserves a Spot in Your Portfolio?
Key Takeaways
The companies operating in the Zacks Oil and Gas – Production Pipeline industry play a critical role in the energy ecosystem by addressing growing demand through the transportation of crude oil and natural gas that fuel transportation, industrial activity, and households. In addition to ensuring a dependable energy supply, these systems bolster energy security, promote economic development, and deliver vital feedstocks for petrochemicals and fertilizers. With energy consumption on the rise, midstream companies are essential in meeting conventional energy needs while also supporting the shift toward cleaner technologies and reduced carbon emissions.
Their extensive pipeline networks provide a safe, efficient and cost-effective means of moving crude oil, natural gas and refined fuels across vast distances. This infrastructure secures a consistent supply for refineries, power plants and consumers, while offering a lower-risk, more economical alternative to rail or trucking. Two leading players in the U.S. midstream sector are Plains All American Pipeline (PAA - Free Report) and Energy Transfer (ET - Free Report) .
Plains All American Pipeline specializes in the transportation and storage of crude oil and NGLs across North America. Its vast pipeline and terminal network is largely centered in high-output areas like the Permian Basin, a key source of volume growth. The company derives most of its cash flow from long-term, fee-based contracts, which helps limit its sensitivity to commodity price volatility.
Energy Transfer, by contrast, operates a more diversified midstream platform, with assets across crude oil, NGLs, refined products and natural gas pipelines, along with storage and processing facilities. Similar to Plains, it has a strong footprint in the Permian Basin. In addition, Energy Transfer operates the Dakota Access Pipeline and owns interests in export terminals, expanding its scale and creating incremental cash flow opportunities.
Increasing hydrocarbon volumes in the United States are generating demand for midstream services. Amid such a backdrop, let’s closely compare the fundamentals of these two stocks to determine which one is better for investment now.
PAA & ET’s Earnings Growth Projections
The Zacks Consensus Estimate for Plains All American Pipeline’s 2026 earnings has increased by 6.62% in the past 60 days.
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for Energy Transfer’s 2026 earnings has moved up by 0.65% in the past 60 days.
Image Source: Zacks Investment Research
Return on Equity
Return on Equity (ROE) is an important measure of financial performance that indicates how efficiently a company converts shareholder equity into profits. It highlights management’s effectiveness in utilizing invested capital to grow earnings and enhance shareholder value.
ET’s current ROE is 10.71% compared with PAA’s 11.04%. This indicates PAA’s management is utilizing its funds marginally better than Energy Transfer.
Image Source: Zacks Investment Research
PAA and ET’s Cash Distribution
Midstream companies generate substantial cash flow primarily due to fee-based contracts and regulated tariffs that constitute a significant portion of their income. Both firms generate cash flows, a substantial portion of which is distributed among their unitholders.
Plains All American Pipeline’s current cash distribution yield is 7.92%. The firm has raised its distribution five times over the last five years. The annualized average distribution growth for the last five years is 20.5%.
Energy Transfer’s current cash distribution yield is 7.39%. The firm has raised its distribution 16 times in the last five years. The annualized average distribution growth for the last five years is 21%.
Debt to Capital
The oil and gas midstream industry is capital-intensive; the firms operating in this space need to borrow to fund their capital projects. At present, ET’s debt to capital is 58.19% compared with its industry average of 56.63%. PAA’s debt to capital is 42.11%.
Image Source: Zacks Investment Research
Valuation
Plains All American Pipeline’s units are somewhat inexpensive relative to the industry. PAA’s current trailing 12-month Enterprise Value/Earnings before Interest, Tax, Depreciation and Amortization (EV/EBITDA) is 10.63X compared with the industry average of 10.91X. This indicates that the firm is presently undervalued compared with its industry.
Energy Transfer is trading at an EV/EBITDA of 9.31X, at a discount compared with its industry.
Price Performance
Plains All American Pipeline’s units have gained 4% in the past six months compared with Energy Transfer’s rally of 1.2%.
Price Performance (Six months)
Image Source: Zacks Investment Research
Summing Up
PAA and ET deliver efficient services across their respective operating regions, supported by extensive infrastructure in the prolific Permian Basin.
Plains All American Pipeline mainly focuses on the transportation and storage of crude oil and natural gas liquids, relying on a fee-based model that helps cushion it from commodity price volatility. Energy Transfer, while more diversified with assets that include natural gas pipelines and storage, has encountered challenges tied to its higher debt levels.
Both stocks currently carry a Zacks Rank #3 (Hold). Yet, Plains All American Pipeline is a better pick for investors based on its lower debt levels, stronger earnings estimate movement, and a better ROE compared with Energy Transfer.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.