NEW YORK (TheStreet) -- Shares of Energy Transfer Equity (ETE) advanced 2.25% to $14.11 in Tuesday's trading session after Barclays reinstated coverage with an "overweight" rating and $20 price target on the stock.
The master limited partnership has a "strong cash flow growth profile," as reflected in the firm's distribution forecast of 14% compound annual growth rate between 2015 and 2020, Barclays wrote in a note released earlier today.
Shares of the pipeline operator are trading at a 8.26% yield. Leverage concerns and residual litigation overhang after the company terminated its planned merger with Williams Cos. (WMB) are contributing to the discount, Barclays contended.
"Our view is that the leverage issue is manageable given the substantial coverage ETE has today (1.45x in Q1) as well as cash retention of $520-$845mm through the series A preferred deal. By leaving distribution flat in 2016/2017, our model shows substantial de-leveraging taking place, which should translate into improved valuation," the firm said.
Separately, TheStreet Ratings team rates the stock as a "hold" with a ratings score of C.
Energy Transfer's strengths such as its increase in net income, good cash flow from operations and impressive record of earnings per share growth. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself and poor profit margins.
You can view the full analysis from the report here: ETE
TheStreet Ratings objectively rated this stock according to its "risk-adjusted" total return prospect over a 12-month investment horizon. Not based on the news in any given day, the rating may differ from Jim Cramer's view or that of this article's author.