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PAA vs. ET: Which Pipeline Stock Has the Stronger Investment Case?
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Key Takeaways
PAA leads ET in Return on Equity, debt management and six-month price performance.
PAA's earnings per unit growth for 2026 and 2027 is better than ET in the past 60 days.
ET offers a higher 6.66% distribution yield and a cheaper valuation, while PAA leads in distribution growth.
The companies operating in the Zacks Oil and Gas – Production Pipeline industry play a crucial role in the energy supply chain by facilitating the transportation, storage and distribution of crude oil and natural gas to end-use markets. Its extensive infrastructure ensures a steady supply of energy to households, industries and the transportation sector while strengthening energy security and supporting economic development. Midstream operations also enable the reliable delivery of essential raw materials for petrochemical and fertilizer manufacturing. With global energy consumption expected to rise, midstream companies are well positioned to benefit by transporting hydrocarbons to export terminals while supporting the growing adoption of cleaner energy sources and lower-carbon technologies.
Two prominent players in the U.S. midstream energy sector are Plains All American Pipeline L.P. (PAA - Free Report) and Energy Transfer LP (ET - Free Report) . Both companies operate extensive pipeline networks that play a vital role in transporting crude oil, natural gas and refined petroleum products across the United States. Their infrastructure supports the efficient movement of energy supplies to refineries, power generation facilities and end markets, offering a safer, more economical and reliable transportation alternative to rail and trucking.
Plains All American Pipeline specializes in the transportation, storage and marketing of crude oil and natural gas liquids (NGLs) across North America. Its well-established pipeline and terminal infrastructure is concentrated in major oil-producing regions, particularly the Permian Basin, allowing the partnership to capitalize on sustained production activity and growing transportation requirements. In addition, its largely fee-based operations and long-term contractual arrangements provide greater cash flow visibility while limiting exposure to commodity price volatility.
Energy Transfer, meanwhile, maintains a more diversified midstream business encompassing crude oil, natural gas, NGLs and refined products transportation, along with gathering, processing, storage and export operations. The company’s expansive infrastructure network and strong footprint in key production regions, including the Permian Basin, position it to benefit from growing domestic energy demand and export opportunities. Furthermore, strategic assets such as the Dakota Access Pipeline and its interests in energy export facilities strengthen Energy Transfer’s competitive position, expand market access and support long-term cash flow generation.
With U.S. oil and natural gas production continuing to grow, demand for midstream transportation, storage and processing services remains strong. Per a report from Fortune Business Insights, the global oil & gas pipeline market is projected to grow from $122.22 billion in 2026 to $195.09 billion by 2034. Against this favorable backdrop, a closer examination of the fundamentals of these two midstream firms can help determine which stock currently offers the more compelling investment opportunity.
PAA & ET’s Earnings Per Unit Growth Projections
The Zacks Consensus Estimate for Plains All American Pipeline’s 2026 and 2027 earnings has increased 4.85% and 15.48%, respectively, in the past 60 days.
Image Source: Zacks Investment Research
The consensus estimate for Energy Transfer’s 2026 earnings has increased 1.76% in the past 60 days, while the same for 2027 decreased 0.59% in the same timeframe.
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 11.55% compared with PAA’s 12.13%. This indicates PAA’s management is utilizing its funds marginally better than ET.
Image Source: Zacks Investment Research
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. Interest rates are rising again, which can increase the capital financing costs of the firms.
At present, ET’s debt to capital is 57.52%, higher than PAA’s 37.13%. This indicates ET’s management is utilizing a higher percentage of debt to run its operations compared with PAA.
Image Source: Zacks Investment Research
PAA and ET’s Cash Distribution
Midstream companies typically generate stable and substantial cash flows, supported by fee-based contracts and regulated tariffs that provide predictable revenue streams. Both Plains All American Pipeline and Energy Transfer benefit from these arrangements, enabling them to generate consistent cash flows and return a significant portion to unitholders through regular distributions.
PAA’s current cash distribution yield is 6.32%. The firm has raised its distribution five times over the past five years. The annualized average distribution growth for the past five years is 19.94%.
ET’s current cash distribution yield is 6.66%. The firm has raised its distribution 20 times in the past five years. The annualized average distribution growth for the past five years is 13.68%.
Valuation
Plains All American Pipeline’s units are trading at a premium compared with Energy Transfer. PAA’s current trailing 12-month Enterprise Value/Earnings before Interest, Tax, Depreciation and Amortization (EV/EBITDA) is 10.88X compared with Energy Transfer’s 9.43X.
Image Source: Zacks Investment Research
Price Performance
Plains All American Pipeline’s units have gained 15.5% in the past six months compared with Energy Transfer’s rally of 2.6%.
Price Performance (Six months)
Image Source: Zacks Investment Research
Summing Up
PAA and ET provide efficient midstream services across their operating territories, leveraging extensive infrastructure networks and a strong presence in the prolific Permian Basin.
Based on the above discussion, Plains All American Pipeline has a clear edge over Energy Transfer due to better ROE, lower percentage of debt usage, stronger earnings estimates movement and better price performance.
Considering the above facts, it is evident that Plains All American Pipeline, which currently has a Zacks Rank #2 (Buy), has stronger prospects compared with Energy Transfer, which has a Zacks Rank of 3 (Hold).
View the Zacks #1 Rank List
Image: Bigstock
PAA vs. ET: Which Pipeline Stock Has the Stronger Investment Case?
Key Takeaways
The companies operating in the Zacks Oil and Gas – Production Pipeline industry play a crucial role in the energy supply chain by facilitating the transportation, storage and distribution of crude oil and natural gas to end-use markets. Its extensive infrastructure ensures a steady supply of energy to households, industries and the transportation sector while strengthening energy security and supporting economic development. Midstream operations also enable the reliable delivery of essential raw materials for petrochemical and fertilizer manufacturing. With global energy consumption expected to rise, midstream companies are well positioned to benefit by transporting hydrocarbons to export terminals while supporting the growing adoption of cleaner energy sources and lower-carbon technologies.
Two prominent players in the U.S. midstream energy sector are Plains All American Pipeline L.P. (PAA - Free Report) and Energy Transfer LP (ET - Free Report) . Both companies operate extensive pipeline networks that play a vital role in transporting crude oil, natural gas and refined petroleum products across the United States. Their infrastructure supports the efficient movement of energy supplies to refineries, power generation facilities and end markets, offering a safer, more economical and reliable transportation alternative to rail and trucking.
Plains All American Pipeline specializes in the transportation, storage and marketing of crude oil and natural gas liquids (NGLs) across North America. Its well-established pipeline and terminal infrastructure is concentrated in major oil-producing regions, particularly the Permian Basin, allowing the partnership to capitalize on sustained production activity and growing transportation requirements. In addition, its largely fee-based operations and long-term contractual arrangements provide greater cash flow visibility while limiting exposure to commodity price volatility.
Energy Transfer, meanwhile, maintains a more diversified midstream business encompassing crude oil, natural gas, NGLs and refined products transportation, along with gathering, processing, storage and export operations. The company’s expansive infrastructure network and strong footprint in key production regions, including the Permian Basin, position it to benefit from growing domestic energy demand and export opportunities. Furthermore, strategic assets such as the Dakota Access Pipeline and its interests in energy export facilities strengthen Energy Transfer’s competitive position, expand market access and support long-term cash flow generation.
With U.S. oil and natural gas production continuing to grow, demand for midstream transportation, storage and processing services remains strong. Per a report from Fortune Business Insights, the global oil & gas pipeline market is projected to grow from $122.22 billion in 2026 to $195.09 billion by 2034. Against this favorable backdrop, a closer examination of the fundamentals of these two midstream firms can help determine which stock currently offers the more compelling investment opportunity.
PAA & ET’s Earnings Per Unit Growth Projections
The Zacks Consensus Estimate for Plains All American Pipeline’s 2026 and 2027 earnings has increased 4.85% and 15.48%, respectively, in the past 60 days.
Image Source: Zacks Investment Research
The consensus estimate for Energy Transfer’s 2026 earnings has increased 1.76% in the past 60 days, while the same for 2027 decreased 0.59% in the same timeframe.
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 11.55% compared with PAA’s 12.13%. This indicates PAA’s management is utilizing its funds marginally better than ET.
Image Source: Zacks Investment Research
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. Interest rates are rising again, which can increase the capital financing costs of the firms.
At present, ET’s debt to capital is 57.52%, higher than PAA’s 37.13%. This indicates ET’s management is utilizing a higher percentage of debt to run its operations compared with PAA.
Image Source: Zacks Investment Research
PAA and ET’s Cash Distribution
Midstream companies typically generate stable and substantial cash flows, supported by fee-based contracts and regulated tariffs that provide predictable revenue streams. Both Plains All American Pipeline and Energy Transfer benefit from these arrangements, enabling them to generate consistent cash flows and return a significant portion to unitholders through regular distributions.
PAA’s current cash distribution yield is 6.32%. The firm has raised its distribution five times over the past five years. The annualized average distribution growth for the past five years is 19.94%.
ET’s current cash distribution yield is 6.66%. The firm has raised its distribution 20 times in the past five years. The annualized average distribution growth for the past five years is 13.68%.
Valuation
Plains All American Pipeline’s units are trading at a premium compared with Energy Transfer. PAA’s current trailing 12-month Enterprise Value/Earnings before Interest, Tax, Depreciation and Amortization (EV/EBITDA) is 10.88X compared with Energy Transfer’s 9.43X.
Image Source: Zacks Investment Research
Price Performance
Plains All American Pipeline’s units have gained 15.5% in the past six months compared with Energy Transfer’s rally of 2.6%.
Price Performance (Six months)
Image Source: Zacks Investment Research
Summing Up
PAA and ET provide efficient midstream services across their operating territories, leveraging extensive infrastructure networks and a strong presence in the prolific Permian Basin.
Based on the above discussion, Plains All American Pipeline has a clear edge over Energy Transfer due to better ROE, lower percentage of debt usage, stronger earnings estimates movement and better price performance.
Considering the above facts, it is evident that Plains All American Pipeline, which currently has a Zacks Rank #2 (Buy), has stronger prospects compared with Energy Transfer, which has a Zacks Rank of 3 (Hold).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.